Small business owners have much to do. Not only must they manage the day-to-day operations of their businesses, but they also have to think about the future. A critical aspect of planning for the future is estate planning.
Why Small Business Owners Need An Estate Plan
Estate planning is thoughtful preparation for everyone, but it is especially critical for small business owners who have worked hard to create employment opportunities and serve their community. Here are some of the reasons why:
One of the biggest reasons small business owners need an estate plan is to ensure businesses continue operation in the event of death or incapacity. The company may have to be sold or shut down without a plan. An estate plan can ensure that the business can continue running smoothly even if the owner can no longer be involved.
Another reason small business owners need an estate plan is to protect their assets. Without a plan, the business assets may be subject to creditors’ claims or need liquidation to pay estate taxes. In addition, an estate plan can help protect business assets and ensure they are available to support the family and business in the event of the owner’s death.
Estate planning can help small business owners save on taxes. By taking advantage of tax-planning strategies, small business owners can minimize the amount of taxes their heirs will have to pay on their estate. For example, a tax professional might recommend using trusts, gifting assets, and making charitable donations.
Why Would a Small Business Owner Want To Set Up a Trust?
There are many reasons a small business owner wants to set up a trust. Trusts are ideal for asset protection, minimizing taxes, and ensuring that the business can continue operating in the event of death or incapacity.
Trusts are also flexible and can get customized to meet the specific needs of the small business owner. For example, the trust can get established to pay out over time or upon the death of the small business owner.
Trust Vs. LLC
Among the common questions that small business owners have is whether to set up a trust or an LLC for their business. But, it is essential to note that these are two different legal entities.
An LLC is a business entity that offers limited liability protection to its owners. A Limited Liability Company designation means that the owner’s assets have protection from creditors’ claims against the LLC.
Alternatively, a trust is a legal entity that small business owners can use for asset protection and estate planning. However, trusts are not businesses, so they do not offer limited liability protection to their owners.
Small business owners should consult an attorney or accountant when deciding which entity to use for their business. They can help determine which entity will best meet the company’s needs.
Succession planning is another essential aspect of estate planning for small business owners. Succession planning determines who will take over the business in the event of the owner’s death or incapacity.
Without a succession plan, the future of the business may be uncertain. For example, the family may not agree on who should take over the company, or the business may need to get liquidated. A succession plan can help avoid these problems and ensure the business gets passed on to the person or persons best suited to continue running it.
So whether leaving these responsibilities to common law, setting up a trust, or utilizing an LLC, small business owners must consider their estate planning options carefully.
Small Business Estate Planning Is The Foundation For An Empire
Estate planning is critical for small business owners. It can help ensure the continuity of the business, minimize taxes, protect assets, and provide for succession planning. These are essential components of a successful small business. In addition, you are establishing the foundation for a lasting empire with a plan for the estate.
All assets, including business assets, should be included in an estate plan. Business assets include inventory, equipment, vehicles, real estate, accounts receivable, and anything else of value. An estate planning attorney can help determine which assets should get included in this plan.
Estate taxes can significantly reduce the value of a small business. An estate plan can help minimize these taxes and keep more of the business value in the family. Small business owners can use various strategies to reduce taxes, including trusts, gifting assets, and charitable donations.
This article was brought to you by Heban, Murphree & Lewandowski, LLC, a probate law firm based in Toledo, OH, serving clients nationwide.