In North Carolina, small business owners spend their lives trying to create an effective and successful entity. Those who create a profitable business undoubtedly want to see it continue after they are gone. This requires the business owner to have an estate plan as well as a plan of succession for the business to continue operating no matter the circumstances.
Knowing the basics of estate planning is a first step. But it is also imperative to think about various aspects of the business such as the structure, who will make the decisions, how issues will be resolved and much more. For all these considerations, it is wise to be fully prepared.
The fundamentals of estate planning
When a person creates an estate plan, they are stating where they want their property to go after they have passed on. This is frequently viewed from the perspective of families who own a home, have bank accounts, automobiles, collectibles and sentimental items deciding who will receive what from their estate. It also extends to a small business.
Details need to be listed as to what the testator wants with their small business and how it will continue in operation. It might have been a family business with a spouse, children and other relatives taking part in its operation. Some could have played a more integral role than others. Perhaps the spouse ran various aspects of the business and will be trusted to continue in that role after the testator has died.
There could be adult children or children who have not yet reached the age of majority who also performed key functions in the business. They could be in line to take over. When there are siblings or more than one child and several people are vying for the opportunity to take charge, having a clearly stated line of succession can avoid rancor and costly legal battles. The business itself must be valued. Finances must be addressed as there could be loans in the testator’s name. The transfer of the business needs to be organized and upfront.
Proper planning is critical
Addressing the passing down of a business as part of an estate plan creates unique challenges with multiple layers. It is wise to note that there are not inevitable problems with the succession, but there can be disputes if the business owner is unclear in how they want the process to move forward after they are gone. Creating a comprehensive document that details the succession plan can be accomplished if people know estate law, state their objectives and take the steps to carry them out.