Hyden, Miron & Foster, PLLC Law Blog

Tuesday, July 10, 2018

Estate Planning for Small Business Owners

What unique considerations exist for business owners when creating an estate plan?

Business owners wear many hats. As a small business owner, you are a general manager, advertising and marketing manager, therapist, copywriter, accountant, and much more. You play a vital role in your business’ success, and it is critical that you take steps to ensure your business will continue to thrive after your death. Without an estate plan in place that contemplates the needs of the business, your death could result in the end of the business. Our Arkansas estate planning attorneys explore the estate planning needs of small business owners below.

Incorporating Business Succession Planning into Your Estate Plan

Everyone, regardless of whether you own a business, should have at least a basic estate plan in place. Your estate plan will likely include a will and powers of attorney. Your will dictates who will receive which assets after your death, as well as who will care for your minor child. A power of attorney for healthcare and a durable power of attorney provides a selected loved one with the power to make crucial decisions for you if you are incapacitated.

Along with a basic estate plan, business owners need a business succession plan. A business succession plan is a plan for what will happen to the business if you become disabled, retire, or die. Without such a plan in place, your business ownership share could revert to your partner or could be passed down to someone whom you would not have chosen. Business succession planning allows you to dictate the future of the business.

Select a Successor or Sell the Business

There are two main options when it comes to a business succession plan. You can select a successor to pass down your ownership share or you can elect to have the business sold upon your death. If you want to go the route of choosing a successor, make sure you select your successor with care. Many business owners leave their ownership share to a trusted loved one or a loyal employee. Make sure whoever you choose is groomed to take over your role.

Alternatively, your estate plan could call for the sale of the business upon your death. You will want to either set a price in advance for the sale of the business or call for the business to be sold for fair market value, being sure to specify a means for valuing the business. Contact an estate planning attorney for more assistance with creating a strong business succession plan.

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