As a small business owner, you likely see your business as one of your most valuable assets. It could make up a bulk of your net worth, and it also represents ongoing income for you and your family.
As such, when you are making your estate plan, you may wonder if you need to include your business as one of the assets that you pass on to the next generation. Do you add the business to your estate plan the same way you would add a home, a bank account or real estate?
Identifying the best way to make the transfer
Business assets can go through probate, and you can include your business in your estate plan – or even put it into a trust. However, there may be a better way to do it, so it is important to consider all of your options.
For example, some business owners will set things up to make the transfer while they are still alive. They will begin business succession planning by identifying a successor, giving them on-the-job training, setting up roles for multiple family members and passing ownership before they pass away. After all, you may want to retire from the business in your 60s, but you still have a lot of life ahead of you, and you may want to transfer ownership before your family would need to rely on your estate plan.
Another potential option to consider is a buy-sell agreement. This may be used if you already have co-owners who are not part of your family, for example. It ensures that the co-owner becomes the sole owner of the business, rather than having the business unintentionally pass to your spouse or other surviving family members.
Your legal options
Exactly how you choose to address this is up to you, and everyone’s situation is unique. Just make sure you know what legal options you have to make adequate plans in advance.