When you consider how few businesses flourish at the death of their founder, it should be no surprise that great estate planning is an essential component to aiding family business survival.
While all of us are focused on our careers, nothing takes quite the same dedication and nurturing as when you work for yourself in your own business. How is it then that 65% of all entrepreneur has no estate plan at all?
Business succession planning is a process in which business owners research and consider a strategy to move forward in the event of death, illness, or simply transition. Such planning is a process in which business owners research and consider a strategy to move forward in the event of death, illness, or simply transition. There is no “one size fits all” plan. A business owner should carefully consider his or her options. Without a plan in place, there’s a good chance for failure.
Consider a trust to be your business succession plan. It can answer the all-important question of who runs your business if you are incapacitated or die unexpectedly. It can also address what happens if none of the family wants the business. While none of the questions are pleasant to contemplate they are nonetheless as vital a part of operating your business as anything else you likely do.
Don’t overlook providing your Trustee with the proper ‘powers’ within the trust to operate your business. This means making sure your Trustee has the ability to pledge business assets so that they can to borrow working capital. Provide the power to sell selling unproductive business assets. Then there are other issues such as how much liquidity should remain in the business at all times, ownership percentages, how to resolve family disagreements and the management capabilities of those relevant individuals.
Reference: Entrepreneur “An Emergency Safety Valve: The Case for Entrepreneurial Estate Planning” by Ellen Martin dated July 20, 2017