Your dedication to the management of day-to-day operations is probably a major reason for the success of your company.
But what will happen to the company when you are no longer here? As a business owner, you may find the time has come to create an effective succession plan.
A buy-sell agreement
If you have co-owners, you can create a buy-sell agreement. This kind of document ensures that upon your death, the co-owners automatically purchase your interest in the company. The agreement protects against your spouse or other family members unintentionally becoming owners.
When creating a succession plan, it is important to address management succession. Planning might include the development and training of successors, delegation of responsibility and the retention of key employees.
You should develop a succession plan around the best interests of the business and your family. Highlight the coordination between ownership and management. If you plan for the transfer during your lifetime, you will be able to consult with the successor you choose. An early transfer also reduces the possibility of a discounted sale of your business.
Your business may continue growing and your taxable estate will include the value of the business as of the date of your death. To pass your business assets along to your children and minimize taxes, you might consider establishing a grantor retained annuity trust (GRT) or a grantor retained unitrust (GRUT). With either of these, any business appreciation will not be subject to estate taxes. An estate planning attorney can help you sort through business succession options and choose the best solution for your circumstances.