When it comes to business planning, most entrepreneurs generally try to keep things as simple as possible. A standard business plan has two main purposes. It provides an operational outline that can help you to maintain your vision while you lead and manage your business each day. It also provides a broader strategic plan that can guide the decisions you make about everything from sales and marketing to online expansion. If you’re like most business owners, however, you may need help ensuring that your business plan complements and facilitates your comprehensive estate planning efforts.
Why You Need More Help Than You Might Realize
The best entrepreneurs almost always recognize the value of seeking help for tasks that lie outside their core competencies. Fine-tuning your business plan so that it more effectively complements your broader estate planning goals is just such a task. The fact is that your business can have a major impact on the success of your estate planning strategy, and your entire plan could be in peril if your business plan isn’t designed to address those estate needs. And though you can create much of your business plan on your own – using forms and templates downloaded from the internet, there are key elements of overlap with your estate plan that usually require professional legal expertise.
Is Your Business Succession Plan Secure?
When you own a business, succession should always be an important goal. The plan that you create for succession is one that can set the tone for how your business impacts your estate plan. Succession plans aren’t just about what happens when you die, but can encompass a variety of other exit strategy needs – like a desire to see ownership of the company pass to your children or other heirs at some point in the future.
For example, it is likely that you’ll eventually want to retire and enjoy the fruits of your life’s labors. Do you have a plan in place to enable you to make that transition? Do you have a strategy to groom an heir to be your successor, or are you just leaving everything to chance? Apart from retirement, there are other reasons you might eventually need to leave the business. If you fall ill or suffer an injury that prevents you from performing your job duties, you may find yourself needing to transfer control to someone else.
The decisions you make about succession now can impact your estate in many ways. As a business owner, much of your personal wealth is likely to be tied up in business assets. If those assets are not properly accounted for in your broader plan, then your estate plan goals could be thrown off track by unexpected tax obligations or other business-related concerns. Your business plan should include succession planning that responsibly addresses those concerns.
Do You Have a Buy-Sell Agreement in Place?
Your business planning can never be considered complete if you don’t have a buy-sell agreement in place. This agreement provides the tool you need to implement your succession plan, and provides important details that address all the main issues surrounding your exit from the company – or a partner’s exit if you share ownership of the business.
With a buy-sell agreement, you can establish ground rules that determine the fate of your interests in the company if you become incapacitated, decide to retire, or die. The agreement lays out defined terms for the sale of those interests, determines who can purchase the company, and even establishes a baseline price. This can be an effective way to enable an heir to buy the company when you die, ensuring that it remains in the family while avoiding conflict with other heirs who might have an interest in ownership. It’s also effective when you have business partners, since it offers clear-cut terms for the disposition of your part of the enterprise.
Buy-sell agreements are often backed with life insurance policies, especially when the company is a partnership. In those instances, each partner takes out a life insurance policy on himself, with any payout given to the deceased partner’s estate as payment for his or her share of the company. That helps to strengthen the buy-sell agreement’s provisions by providing the funding needed for any buyout.
Are Your Business Assets Protected?
For some people, company asset protection is defined only in terms of insurance policies and other tools and strategies that secure the company against litigation and other threats. When estate planning is at issue, however, asset protection is about much more than that. Your estate planning can benefit from an assessment of your company’s real value. It can also benefit from the level of organization that you use as you keep track of your business assets.
In addition to appraising your company, you should create a guide that tracks your business assets. You need to have detailed accounting of all the different components that help to ensure that your company runs smoothly from day to day. That includes suppliers and other companies that interact with you, details about employee benefits and insurance, account details for loans, bank accounts, and insurance policies, and anything else that has value to the continued operation of your business. These details are all critical for a proper succession plan, and will prove invaluable if your buy-sell agreement needs to be implemented.
With these business plan components in hand, an experienced estate planning attorney will be able to help you create the strategy you need to ensure that your company and personal assets have the protect they need. At Biddinger, Bitzer & Estelle, PLLC, our estate and business planning experts assist you with the creation of a comprehensive estate strategy that includes a business plan that meets your long-term needs. We know that today’s business plan needs to do more than just guide your company activities for the next three to five years. It needs to serve your interests in ways that can last a lifetime. To learn more about these benefits, contact us at our website or call us today at (989) 872-5601.