The day will come when you die and so you have to use the time you are alive to plan ahead. As a budding entrepreneur, you have to consider what will happen to your firm when your time from this world expires. Therefore, planning ahead in case of an unforeseen death happening to you will help give you peace of mind as you make your transition from this world to the next life.
Follow the following estate planning tips to keep your business going in case of premature death happening to you.
Plan for the survival of the business
Some entrepreneurs only plan for the welfare of their family members and not for the business they work so hard into. Once you die, if you do not pass on your business to your chosen successor, chances are it will die along with you.
Sometimes creditors might move in and possess the business, even though the amount you owe them is nothing near what the business is worth. The reason why creditors steal your business from right under your beneficiary’s nose is that you did not leave an estate plan stating what should happen to the business if you die. Still, your chosen successor can take the matter to court, but it may take a pretty long time for the end result to come and this method can be costly as well. Therefore, get your estate plan off the ground so that your business can be in safe hands after you die.
Plan for tough times ahead
Estate planning isn’t just all about when you die. It covers when you are unable to carry out your normal functions because of an accident that happens to you or a sickness you are enduring. Alpharetta Estate Law says that if you neglect to craft an estate plan to cover your inability to properly function, the court will decide who takes care of you and what to do with your business.
If you draft up a will before anything bad happens to you, you get to choose a power of attorney. One of the main problems that occur if a court should name someone as the power of attorney is that this decision can cause conflicts among family members of the entrepreneur who owns the business.
Power of attorney
Every entrepreneur should have a power of attorney agreement as part of their estate plan just in case he or she is unable to carry out his or her duties. The power of attorney makes it possible for the entrepreneur to choose who he wants to handle his business affairs if he should become incapacitated. People such as the owner’s family members, partners or any remaining owners can be named in the power of attorney.
People that are named in the power of attorney have the power to manage the assets of the business, make out payroll as well as access all financial accounts that pertain to the dead entrepreneur’s enterprise. They also have the authority to use the proceeds from the business to pay creditors and vendors.
Make a succession plan
For new owners to take control of your business you need to prepare a succession plan. The succession plan will outline in detail who are the new owners of the business in case you should pass away and even name defining their key roles that each person should play in the operation of the firm.
People you may name to succeed you are family members, friends, and business colleagues. In addition, a well-developed succession plan will include such details as to who will hold majority ownership in the business, type of compensation to pay to individuals, future promotions and how disputes should be handled.
Set up a buy-sell agreement
If you are a partnership or sole proprietor business, you should set up a buy-sell agreement outlining your desire about how to redistribute your interest in the event of your death occurring or any disability that might prevent you from carrying out normal functions. Additionally, in the case of bankruptcy or divorce occurring, a drafted buy-sell agreement can play an important part in how assets are handled.
Two main types of buy-sell agreements are stock-redemption agreement and cross-purchase agreement. These two agreements work to allow the remaining owners the capability to redeem the stake of the deceased owner. This method will also determine the way in which the value of the business should be dealt with.
As a savvy and determined business person, it is in your best interest to make appropriate plans just in case you die and have to leave your organization behind. With the business still functioning, your firm will continue making profits while providing a sustainable income for those you left behind.
Interesting related article: “What is Estate Planning?”