In the early days of starting a business, you might be tempted to gloss over ownership structure, equity stakes, and other seemingly boring details. After all, you might think, as long as you keep taxes low, paperwork uncomplicated, and partners motivated, better to deal with the big stuff first. But these decisions can have a significant cost down the road…
Planning for your estate is, more often than not, also an activity of coming to understand your estate and the nature of the things you own. If you’re a small business owner, it’s often more important to come to terms with the nature of your business and your ownership in it earlier rather than later.
As pointed out in a recent article over at BusinessWeek, ownership is an integral concept to think through at the point of start-up, but it’s important to remember to think in the long-term, too.
The shape that you give a business will, in the many ways discussed in the article, shape the way it is perceived and received by potential investors. Likewise, though, the initial allocation of rights and ownership will shape both the long-term capabilities of the business and the nature of the business assets that figure into your estate.
The many complications and folds take time to understand, and often rely entirely on the individual circumstances, and for that reason it’s important to form a thoughtful plan, or risk losing sight of the long-term goals of the business and for your assets.
To form a business, then, is a balancing act. While you balance between profit and loss, you also need to balance between present and future, to include between present business and future wealth transfers.
Reference: Businessweek (February 22, 2012) “Structuring a Business with Investors in Mind”