Why Should A Small Business Owner Do Business And Estate Planning?

Why should you as a business owner do estate and business planning?

At your death or long-term disability, would your spouse know:

  • How to contact your vendors to explain the situation and negotiate better financial terms
  • Know who your banker is?
  • Know what the passwords to your computer?
  • Be able to assure your employees the company will continue and be alright?
  • Be able to pay off the personal note that you signed for the business and is being called in because of your situation?
  • Know where the life insurance policies are if any?
  • Have any idea if you have a buy and sell agreement with a partner and what are the terms of the agreement?
  • Be aware that she may be running a business illegally if she was not authorized to do so?
  • Know who your estate attorney is, if you have one?

There are many more of these questions, but they are only a few of the reasons why a small business owner should do estate planning.

According to the Small Business Administration, about 90% of all US businesses are family-owned or controlled.  Approximately 70% of these businesses will not pass successfully to the second generation, 85% won’t make it successfully to the third generation and less than 5% pass to the fourth generation.

Another reason for estate planning!

At your death!  Will the business be a fire sale?  Your competition is waiting to purchase your assets for pennies on the dollar.  They also know your estate will need to raise cash quickly.    Your business will become a “fire sale”without planning.

Another good reason for business and estate planning!

If you have a borrowed money from the bank, you signed for it personally.   Your estate and you family are responsible for that payment.  Plus, there is a great chance the bank will hold off on any future loaning for your company.

Another good reason for business and estate planning!

If you have a partner, will they want to be in business with your spouse?  Will your spouse want to be in business with them?  If your spouse is a minority stockholder, or minority business partner, he or she may not be receiving fair treatment like you did.  You had a skill that contributed to the business, your spouse may not.

Another good reason for business and estate planning!

 By not planning your estate and business, you are possibly losing the greatest potential value of your business for your family and for your retirement.

 

Of course, there are many more reasons for a business owner to do comprehensive estate and business planning, but the above listed is enough to motivate the mature business owner to get their affairs in order and continually update them. 

 

 

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