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An entrepreneur’s greatest asset is their business.

You’ve worked incredibly hard to build your business.

Most people don’t want to think about what would happen if they weren’t around to keep things going, so I wouldn’t expect you to be excited about the prospect of what comes next…

But as a business owner, you’re not just responsible for your family — you have employees, partners, and customers that depend on you.

Who would run your business if you couldn’t?

What would happen if you became disabled or passed away?

These are hard but necessary questions, especially if you want to preserve what you have built and ensure it continues to operate and support your family and loved ones after you are gone.

Creating a Succession Plan for Your Business

The main purpose of a succession plan is to address the systematic transfer of the management and ownership of your business.

Management succession planning can include:

  • Development, training, and support of successors.
  • Delegation of responsibility and authority to successors.
  • Maximizing retention of key employees through equitable compensation planning for management, family/non-family employees, and active/inactive shareholders.

Of course, as you increase in age, there are ways that you can plan for succession during your lifetime by timing the transfer of your business near your retirement or at a certain age.

If you have business partners, you should consider adding a clause in your operating agreement that your interest in the business is automatically purchased by the other owners upon your death.

No matter what you decide, you’ll want to structure your estate plan in a way that minimizes taxes and ensures that your business remains operable when you are no longer there to manage it.

Trusts are an effective way to protect against probate and offer liquidity to your loved ones after you pass.

Thinking about this in the beginning is important because what your business is worth while you are setting up your plan and what it is worth after you are gone can be wildly different.

One way to minimize taxes and sidestep liquidity issues brought on by probate is to establish an irrevocable life insurance trust (ILIT).

A properly structured ILIT means that benefits paid to your loved ones from the underlying insurance policy do not pass through probate and are available immediately.

Talk to an Estate Planning Attorney Today

Thinking ahead in life and business is important. That is ultimately what brought you here today. We congratulate you on taking the first step and would like to offer a free strategy session to learn more about your business and goals.

Contact us today to learn how we can help you.

Frequently Asked Questions

YES, all assets, including business assets, generally must go through probate (unless the assets allow for the naming of beneficiaries).

However, certain trusts (GRATs or GRUTs) can be established during your lifetime that will allow any subsequent growth of the trust assets to pass outside of your taxable estate. It is important to consult with an attorney and/or tax advisor about your specific circumstances.

While there is no one size fits all approach to estate planning, in almost all cases, any time you have substantial assets or assets that you do not want tied up in probate, setting up a trust can be a smart move. The type of trust you choose depends on your goals and what you are hoping to accomplish. The easiest way to understand what is right for you is to get a free consultation.

They are completely different entities that serve two purposes. An LLC is designed to shield your personal assets from lawsuits. A trust is used to protect your estate from probate costs and inheritance taxes when you die. A trust also helps prevent the court from taking over control of your assets if you come incapacitated.