Are you a small business owner? If so, you have likely invested a considerable amount of your time and money getting your business off the ground and operating smoothly. If your business is now turning a profit, and your family depends on that income to pay the bills and maintain the lifestyle to which you are all accustomed, it is crucial to protect that income. You have probably purchased business insurance to protect your business from a variety of threats, such as theft or a natural disaster; however, is your business protected from the impact of your death or incapacity? To ensure that your business is protected, consider the following Albuquerque business succession planning tips.
What Threats Might Your Business Face?
As a business owner, you undoubtedly take steps to protect your business from all sorts of potential threats. Along with ensuring your business against loss from things such as theft or natural disasters, you probably keep a close eye on expenditures to ensure that your profit margin remains acceptable and you screen prospective employees with an eye toward productivity and growth. All of this is done to increase the value of your business as well as the income you earn from the business. While all of those steps are helpful – even necessary – what happens to your business if something happens to you? Now is the time to think and plan ahead. To better understand why that is necessary, ask yourself the following questions:
- If you are incapacitated tomorrow because of a catastrophic accident or debilitating illness, who will take over the immediate day to day control of your business?
- Is it clear to your employees, business associates, and family who will take over in your absence and will they accept that person as their leader?
- Does the individual designated to take over have the legal authority to do so?
- Will your family continue to benefit financially from the success of the business during your incapacity
- If you become permanently disabled, or retire, who will take over your business?
- Will your business be included in the probate of your estate?
- If your business will be part of your estate, what will happen to the value of your interest in the business if it is sold and how will the value of your interest be determined?
- If your business is a family owned business have you prepared the next generation to take over?
- Have you set up the proper legal structure for the business to facilitate the transfer to the next generation?
- What will the tax implications be for your business should you die?
- Does the business have sufficient liquid assets to cover any tax debt that might be owed when you die?
If you cannot answer all of these questions, it is time to sit down and create a business succession plan because failing to do so puts your hard-earned assets at risk.
Business Succession Planning Tips
Recognizing the need to include business succession strategies in your estate plan is only the first step toward ensuring the continued existence and/or profit of the enterprise. While you should certainly sit down and discuss your business succession strategies with your estate planning attorney, the following tips may also help:
- Start planning as soon as the business is up and running.
- Decide as early on as possible whether you ultimately want to pass the business down to the next generation or sell your interest.
- Discuss your plans with your family and get their input.
- If you plan to hand the business down, get your successor involved early.
- Make sure the rest of the family knows your plan and accepts who the successor will be.
- Plan to pass down the legal ownership of the business to the future owner(s) over time to ease the tax burden of the transfer.
- Consider life insurance as a way to ensure sufficient liquidity in the event of your sudden death.
- If you plan to sell your interest, execute a Buy-Sell agreement to ensure that your loved ones will receive the true value of your interest in the business.
- If you execute a Buy-Sell agreement, make sure you address how the value of your interest will be determined.
- Make sure you update your business succession plan as necessary over the years
Contact an Albuquerque Business Succession Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about business succession planning, contact the experienced Albuquerque business succession planning attorneys at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.