Estate planning is essential to making sure your personal assets are protected as you enter your senior years, and that when you pass on, your wishes regarding distribution of those assets are followed. It can avoid probate and protect your heirs from expensive taxes and legal fees.
However, your small business may not be included in this plan unless you take the right steps. Learn estate planning for small business, how to ensure that your company is protected, your options for succession, and how to preserve your legacy.
Estate Planning for Small Business
Estate planning for small business involves specific steps to ensure that your business goes on after you pass away. There are a number of options available for making sure your business goes the way you want it to, including gifting it to a chosen successor, creating a living trust to administer the business, and forming a partnership.
Gifting the Business to a Successor
The most straightforward method of passing on your business is to groom a successor, and then pass on the business to them. This enables you to avoid tax penalties so long as the business is worth less than $14,000, or total lifetime gifts don’t exceed $5.34 million. However, you’ll want to carefully groom the next business owner to make sure they’re capable of continuing your success, and this process needs to be accomplished while you’re still alive. You can’t gift it as part of your will.
Forming a Partnership
Forming a partnership is a good way to preserve your business for your life and beyond. In this method, instead of giving a business away, you’re bringing a second owner on board. You can choose and groom your partner just like a successor, and set up an agreement that defines the circumstances under which your partner can buy you out — which can include your death.
Check your local laws to make sure that your partnership is formed properly, and to account for any tax issues you’ll need to deal with. In Ohio, for example, when a business partner dies, their rights in the property immediately vest in their surviving partners, according to Ohio Code 1775.24.
The Living Trust
A living trust is an excellent way to pass on your business. It allows you to avoid probate and to maintain the privacy of the transition, as well as offering certain advantages from a tax perspective. This is probably the most sensible means of handling your business in terms of an estate plan.
Hiring an Estate Planning Attorney
When it comes time to plan for the future of your business after you die, your best bet is to explore all your options and to secure the services of a qualified estate planning attorney. At Stano Law, we specialize in estate planning for residents of Cuyahoga County, OH, and the surrounding areas.
If you have a business that you need to protect, it’s essential that you act fast. For help getting the right measures in place, contact the Stano Law Offices and schedule a consultation today!