Estate planning tips are crucial for business owners to consider as they run their businesses. It’s important to note that there is much more involved in owning a business than simply managing daily operations and enhancing goods and services. This is probably why many business owners neglect to have a contingency plan in place for unexpected events.
Without a backup plan, an unexpected injury or illness could bring operations to a standstill. Proper planning and preparation are key to ensuring the continued success of the business.
For guidance on estate planning for business owners, read on for valuable tips and insights.
Have a Basic Succession Plan
The number of business owners who don’t actually have an immediate successor in place is surprising, especially since it’s downright essential. The point is for business as usual to continue with very little interruption should the business owner pass on or become incapacitated. They need to have key decision-makers in place who can be trusted to facilitate and oversee the transfer of crucial information.
Have a Power of Attorney in Place
There needs to be a power of attorney declared by business owners to a person they trust to handle the business’s legal affairs in the event they cannot. If there is no power of attorney at the time of the business owner’s demise, the guardian will be appointed by a court. In case the person appointed by the court is someone that’s not exactly a good fit, you can’t do anything to change that decision.
Make Sure There’s a Will in Place
Writing a will is integral to estate planning; it’s the most basic of all estate planning documents. It serves as a clear guide for personal assets to be distributed should anything occur.
The testator (person who writes the will) can also make the decision as to who the business’ executor will be. ‘Executor’ is the term used to describe the person responsible for a business to continue. Aside from the business itself, not having a will in place at a time of accidents or tragedy will also affect the people: employees, partners, and staff alike.
Minimise Taxes
When a business owner passes on, the organisation might just close altogether from the incurred estate taxes alone. Estate taxes can consume up to half (50%) of a business’s total value, which is due up to nine months after the owner’s passing. Most businesses end up having to sell to cover these costs because they’re simply not liquid enough otherwise. Accounting firms can help mitigate this matter.
It should be noted that the Internal Revenue Service (IRS) offers tax breaks for this; look into Section 303 and Section 6166. That way, your estate won’t have to struggle entirely given the rather heavy impact. A good rule of thumb is to hold your business shares in a trust (typically a charitable remainder trust).
Conclusion
It is important for business owners to think about estate planning. A contingency plan is crucial to the business continuing in case of accident or tragedy. Key tips include minimising taxes, having a basic succession plan and making sure there’s a will in place.
Looking for trusted and reliable business accountants in the Sunshine Coast to help with estate planning? Contact Wardle Partners today! We are Caloundra-based business accountants and tax experts that aim to help your business flourish by handling the accounting side of things.
