Penny Wise or Pound Foolish
When it comes to estate planning for your business, many owners think “Oh, my family knows what to do when I die” or “I just want something simple.” When questioned further, it almost always turns out that the initial response is a result of the fear of a large legal bill or fear of the unknown. However, as certain as death and taxes is the certainty that if left unaddressed, the transfer of business ownership will always cost more both monetarily and in terms of stress for those you love. What appears on the surface as “simple” to the business owner with historical knowledge of the company and its operations is anything but simple to the family and co-owners of the deceased business owner. Only once have I had a client tell me that he purposefully wanted to leave a mess for his family after his death. Obviously, that is not the norm.
Proper planning for your business succession necessarily involves more planning than the average Will, but it doesn’t have to be overly complicated either. If you are the sole owner of your business (whether a sole proprietor or as an entity), it is still necessary to address how the transition will take place after death in order to avoid having the assets of the business (if a sole proprietor) or the shares/unit interests in an entity go through the probate process and create a public record of the value of the business. However, when you have co-owners, planning becomes even more crucial. How do you intend to purchase the equity the spouse/family of the deceased co-owner? How will you fund the replacement of your co-owner? Do you want to place a different value on the buy-out in case of death or disability as opposed to divorce or termination of employment? These are very important questions and ones that can be addressed by meeting with your attorney and other trusted advisors such as your CPA to begin the discussion and navigate the issues.
Remember, starting the discussion is half the battle. We can help discuss various triggering events and various valuation methodologies and payout scenarios to preserve cash flow for use in death, disability, divorce, termination or any other trigger that may fundamentally affect your business.
It’s that time of year again and as you make your plans to address year-end tax planning, remember to also address the issues of business succession planning and make sure that you aren’t an owner that creates a mess for your family!
Wegman Hessler specializes in business law for business leaders, applying legal discipline to solve business problems to help business owners run smarter. For more than 50 years, this Cleveland business law firm provides full-service strategic legal counsel for closely held businesses. Learn more at www.wegmanlaw.com.