Although it is not an easy topic to contemplate, small-business owners need to protect their companies should they suddenly pass away. From specialized insurance to succession planning, entrepreneurs need to put in some legwork to ensure their operations can continue running even if they experience an untimely death.
Here are a few key matters to consider:
The personal and business ownership aspects of estate planning are highly intertwined. A Rocket Lawyer survey revealed less than 70 percent of small-business owners who responded to a survey stated that asset distribution is the most important reason to conduct estate planning. Legal experts believe this process should begin as soon as the company becomes profitable.
Entrepreneurs should work with qualified lawyers and insurance agents when working through their estate plans.
Less than one-third of American small-business owners have a succession plan in place, according to Pasha Law PC. This omission will leave their companies in limbo should they pass away. The company will often fall into probate should the owner not have completed succession and estate plans, which could doom the business given the accompanying halt to operations.
Pasha Law PC suggested mapping out a structure with an attorney that will fit financial and liability needs, as well as long-term business goals. Then, build the succession plan with that structure as the foundation.
Life insurance policy
Website All Business argues that insurance policies should include a signed agreement that brings employees, spouses, heirs, stockholders, partners and stakeholders into the mix. The goal here is to ensure everyone who might have a say in the company’s ownership and strategies be in agreement before the owner dies, allowing the firm to function properly and in continuous fashion.
The source suggests making this a “buy-sell agreement” to avoid a range of problems, both with respect to the owner’s family and the company itself. The right agreement will include a key man policy, which gives the company enough money to hire a new boss and survive the initial days following death. Additionally, the buy-sell policy within the agreement facilitates the company’s purchase of your ownership from your spouse, children and other heirs.
Above all else, entrepreneurs should never attempt to go through these processes alone, as attorneys and insurance providers will have the expertise necessary to guide owners toward the best possible strategy.