ESSENTIAL ESTATE PLANNING QUESTIONS
EVERY BUSINESS OWNER MUST ANSWER
Owning and operating a business is difficult. From the moment you wake up until the moment you go to bed (and sometimes even while you are sleeping) you are thinking about all aspects of your business. The hiring, the firing, payroll, strategic growth, marketing, sales – the work and effort you put into your business is relentless. It has to be. Because that is the only way your business is going to continue to prosper.
The last thing on your mind is estate planning and business succession. You are focused on growing your business, not what will happen to it when you are gone.
Yet, you know as a business owner that you are most successful when you are proactive. The same is true with estate planning; there are important estate planning and business succession questions that you must answer today, even while you are focused on the day-to-day aspects of running an organization. Because at some point in your business, the difference between continued success and sudden failure will depend on your answers to these questions (or lack thereof).
Let’s discuss some of these important issues:
If you have partners, then estate planning and business succession is crucial. You need to think about the following questions:
What is going to happen to the business if one of my partners dies?
Am I going to own this business with my partner’s spouse, or (spoiled) children?
How will you pay for buying out a partner if you do not want to own the business with your partner’s spouse?
What is going to happen if my partner gets divorced? Or files for bankruptcy? Is your business going to be subject to a sale if your partner must come up with funds to pay debts?
How will you value the business when one partner dies?
Estate Tax Planning
With or without partners, taxes can destroy your business. You know about the income taxes you pay while you are alive, but to what extent have you addressed the estate taxes your family may have to pay after you pass away? You need to answer the following questions:
How is your estate going to pay for potential estate taxes?
Is your estate going to have to sell your business immediately to pay estate taxes?
Do you have a life insurance policy?
How can you ensure you are going to pass down that policy free of any estate taxes so there is cash to continue running your business?
For many clients, your business is your most valuable asset. You need to answer the following questions to make sure your business stays protected:
Are you in an industry where you get sued often? How can you protect your business from a lawsuit?
Are you worried about getting divorced? How can you protect your business if that happens?
Do you want your spouse’s new husband or unrelated children to own your business?
How do your children handle money? If they inherit your business, do you want it to be subject to their creditors and predators?
Things change quickly. Just because you are feeling fine right now does not mean that you will continue to be healthy. If you are a business owner, you probably think about your health last because there is just too much to do. But there are important questions that you must answer to be prepared for your incapacity:
How can your business continue to run in case you (or one of your partners) becomes incapacitated?
Do you have a key person in place who can continue running the business if you become incapacitated?
Who will pay the bills of the business? Who will sign the checks? Who will make payroll?
The First Step
The first step in your business succession planning is asking the right questions. The questions listed above are only some of the most important questions to start the business succession discussion. Once you start the conversation, then you should meet with one of the New Jersey and New York estate planning attorneys at Pashman Stein Walder Hayden PC who can help you navigate the answers to these crucial questions. Our attorneys have experience working with all types of businesses and business owners to help craft business succession plans that are both practical and tax-efficient in helping you run your business. If you have any questions about how you can best protect your business, please contact one of our Trusts and Estates attorneys today.
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The information contained herein is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials do not create an attorney-client relationship between Pashman Stein Walder Hayden PC and/or its attorneys, and the reader of the materials.