The American Dream is built on the back of small business, especially family business. In a survey by the Family Business Center, it’s estimated that family businesses account for 64% of the United States GDP, generate 62% of the country’s employment and comprise 78% of all new job creation. An overlooked reality of family businesses is that the businesses themselves often outlive their founders. Unfortunately, without proper planning, a business’s success is often derailed when the founder is no longer alive and actively engaged.
If you have successfully built a small business, chances are that you are looking forward to retirement someday and hope to pass the torch to a son, daughter, niece, nephew, or even sell to someone unrelated. Regardless of how long you plan to work, it’s important to plan for the day you can no longer handle the demands of running a business because of illness or death. Most business owners are so caught up in their day-to-day responsibilities that they do not take the time to plan for a successful exit from their business. The idea of planning for possible incapacity can be troubling or off-putting for hard-working professionals. Illness and death, however, are real-life realities that require consideration—especially for business owners. If you still own a business when you die, it could be included in your estate and could be subject to substantial estate taxes and/or court interference. Your family may be forced to sell the business or its assets at “fire sale” prices. Without a proper plan in place, all your years of hard work could be for naught, forcing your business into the hands of Uncle Sam and preventing your family from reaping any benefits.
This can be avoided by finding an estate planning attorney who’s knowledgeable in business succession planning. Planning for how you exit from your business is an integral part of your estate and retirement planning. Proper planning now can provide you with retirement income, reduced income, and estate taxes, and can even allow you to benefit a designated charity, irrespective of whether you transfer your business to family members at discounted values, to employees, or to an outside buyer.
Now is an excellent time to consider business succession planning to ensure that your estate plan addresses your business, familial, and financial goals