As an entrepreneur and small business owner in Illinois, you may feel that creating an estate plan will be a difficult task, and therefore, you continue to postpone the day when you sit down to take care of it. You are not alone in this. According to Fundera, only 70% of business owners have created their estate plans, and many of these are out-dated.
Here are some of the steps you may need to take as you decide what will happen to your company when you are gone:
Drafting your will
This basic estate planning document is one that anyone should have, but in the case of a small business, it is especially important to take the time to describe how you wish your assets to be distributed to your beneficiaries. You will also includes the name of the executor who will take care of closing your estate, including the responsibilities of having your business valued and paying the estate taxes.
Figuring estate tax
The size of your business will determine whether you need to pay federal and state estate taxes. The laws regarding the size of the state and the amount of the tax as well as other factors change frequently, but there are many ways to minimize the estate tax burden, including setting up trusts and gifting assets to family members while you are still alive.
Structuring a buy-sell agreement
If you have business partners, your death or incapacitation could cause ownership issues for them. This agreement can give your partners the first right to purchase your interest in the business and dictate how much it will cost.
Creating a succession plan
Who will take over your role when you are no longer there to run the business, and how will this affect others in the company? You may want to choose one or more of your children to carry on the business, or you may want to set up the succession internally. These are matters to address in the succession plan if you want your business to continue.
Having the conversation
Before you begin choosing who will fill each role, you should have serious conversations with everyone who may be involved, including beneficiaries, spouse, partners, potential executors and others. These people are likely to have valuable input. They should also have at least a general idea of what is in the estate plan, as this can minimize the risk of conflict over your choices after you are gone.
This general information is not all-inclusive and should not be interpreted as legal advice.