What will happen to my business if I die without an estate plan?
Contemplating your own mortality is never an easy thing to consider and many small business owners have likely given little thought to what would happen to the business if they die. However, without an estate plan in place, there is a chance that your business may die with you. Your business could wind up in probate, which may in turn cause the business to close or fail. It is essential that all business owners develop a comprehensive estate plan that will guide their business into the next chapter.
Business Succession Planning Basics
Your business succession plan represents a plan for the future of the business. With a business succession plan, you can dictate what you want to happen to your business after your death. You have many options when it comes to business succession planning. Potential succession plans include:
- Naming a successor to your business: You can pass your business down to a preselected successor if you want the business to continue on with the next generation. You will want to carefully select your successor. Many business owners elect to leave the business to a relative, while others might will the business to a valued long term employee. Your role will be educating your successor as to the operation of the business so that they will be prepared in the event of your death.
- Arrange for the sale of your business: Alternatively, if you do not want to select a successor, you could arrange for the business to be sold if you die. This is often a smart choice for business owners without family members who are sufficiently trained in the field so as to continue the success of the business. In your business succession plan, you can elect to have the business sold upon your death to a third party, a business partner, or an employee. You can agree to a value for the business in advance or specify how the business should be valued upon your death.
Posted in: Estate Planning