When a small business owner dies without a will or estate plan, many things can go wrong. The business could fail. The income from the business could be wiped out. The assets and property could be held up in probate. Family members could squabble, and even if they don't fight, they are still left to figure it all out and pick up the pieces.
When it comes to a small business, you need more than a will. Consider establishing a clear succession plan. Execute a buy-sell agreement and make sure you have a power-of-attorney. These are two tools of many that can be used in an estate plan of small business owners in Tennessee and Kentucky.
What is a Succession Plan?
A succession plan is a great tool for small business owners who want their business to continue after their deaths. The first thing to consider is whether you want the business to stay in your family. If you want it to stay in the family, you can decide who will take over all the various roles and duties. Making this decision is important because you can guide these family members through the ins and outs of your business and help them understand what they may be inheriting.
On the other hand, you could decide to have the business sold upon your death. If that's the case, you need to have such a plan outlined in the succession plan as well.
What is a Buy-Sell Agreement?
If you are not the sole owner of the small business, you may want to think about a buy-sell agreement. Depending on the terms of your operating agreement, if you die your share of your business will go to your estate or and then on to your family. But this may not be advantageous for your circumstances. A buy-sell agreement provides that your share of the business will be sold to the other members or partners of the business for a certain price. The money paid for your share then goes to your estate or will be transferred to other persons you designate.
Why does a Small Business Owner Need a Power of Attorney?
A power of attorney can help make sure your business continues to operate smoothly when you are unable to operate the business yourself. If you do not have a power of attorney in place and you become incapacitated, the court may appoint someone as your conservator. That person may know nothing about your business. However, if you appoint an agent to manage your business, you can make sure that person is well-informed and has the skills and tools your business needs.
The Key Takeaway
Having a comprehensive estate plan will help ensure that your family avoids conflict and your business continues to operate after you have passed. Speak to an experienced estate planning and small business attorney in Clarksville or Hopkinsville if you have questions about starting a small business, want to update an existing estate plan to include your small business, or simply want to get started on a comprehensive estate plan today.