If you own a family business, you likely know how important it is to plan for the future. You probably already know who to pass the business onto and have a mental checklist for things to do when that time comes.
But you might not realize the importance of having all those plans documented. For business owners, it’s crucial to include the succession of your business in your estate plan. This ensures that your business will continue after your death in the manner that you wanted.
When it comes to passing your business to your son or daughter, there are a few ways you can go about it:
- Create a living trust. If you’re not ready to pass your business onto someone else, a living trust is an ideal way to transfer the company while still being at the helm. You can transfer the business to the trust and name the successor to the business as the trustee. You can continue to run your business as usual while the trust exists.
- Create a buy-sell agreement. If you happen to jointly own your business with your son or daughter already, a buy-sell agreement will keep the business in your child’s hands upon your death. This agreement allows the remaining owner to buy out your share of the company after you pass according to the price or value determined upon in the contract.
- Sell the business. An obvious choice for passing your company along to your kids would be to sell the business directly. If you already have plans to retire or need the income from the sale for other reasons, selling your business can be an ideal option.
It’s never easy talking about the future, and especially not about your death. However, when it comes to the continued success of your business, it’s a crucial element of planning.
Take the time to discuss your succession strategy with your family and update your estate plans accordingly. Once everything is in place, you can rest assured that your business will transfer properly after you pass and continue to run the way you want.
