Estate planning can be complicated enough when dealing with your personal assets. When it comes to planning for the future of your business, the estate planning process can get even more involved, but it is also crucial to make sure you have a succession plan in place.
The best place to start when it comes to estate planning and who will take over your business is to talk to an experienced estate planning attorney. The North Carolina estate planning lawyers at Mullen Holland & Cooper, P.A. have over 60 years of experience helping people sort through the legal issues involved in business succession. Our deep knowledge of business law and estate planning law makes us ideally suited to meet your needs. Keep reading to learn more about the basics of business succession and estate planning, or contact us today for a consultation.
Why You Need a Succession Plan
You have a lifetime of hard work and determination built into the foundation of your business. It can be unpleasant to think about what will happen to your business when you are no longer at the helm. Yet the planning you do today can relieve stress and uncertainty about what will happen in the future. Here are a few reasons why you need a business succession plan in place:
- Provides liquidity for you and other owners — For many business owners, their business represents the bulk of their estate. But if you do not want to work indefinitely, you need a way to liquidate your ownership stake upon retirement. Having a succession plan in place can help with this.
- Minimize transfer taxes — When a business changes hands, the new owners often have to pay transfer taxes, which can be a significant expense. Planning ahead of time can help your successors minimize their tax burden when they take over.
- Provide stability and continuity for your business — If you die suddenly or develop a disability, you will want a plan in place for someone to take over your business and keep it going. Without proper succession planning, your business could be thrown into chaos by an unexpected death or illness. If you want to pass on your business to your heirs, you will need an organized plan.
The Elements of a Business Succession Plan
A business succession plan usually includes several key components, such as:
- Business power of attorney — A power of attorney is a document granting another party authority to make key legal decisions on your behalf. However, you may not necessarily want the same person to have legal authority over your business and personal matters. A business power of attorney allows you to choose someone to represent you if you become disabled.
- Buy-sell agreement — If you do not want your ownership stake in a business to transfer to your beneficiaries upon your death, you will need a plan to have your co-owners purchase your stake upon your death. This arrangement is clarified through a buy-sell agreement outlining under what conditions your stake will be sold and to whom.
- Will, trust, or both — If you wish to pass on your business to your family members or other beneficiaries, you should make that clear by drafting a will, establishing a trust, or both. These are common estate planning documents that help you outline what you want to happen to your estate should you die or become disabled.
- Grantor Retained Annuity Trust — If you are looking to retire but still want to keep some income from your business, a Grantor Retained Annuity Trust may be the way to go. In this type of trust, the grantor puts their stock or ownership stake into an irrevocable trust. The grantor can then receive income through the trust, but their stock or ownership stake is transferred to their designated beneficiaries upon their death. This type of trust keeps the ownership transfer out of the public eye and can protect the business from claims against it by the grantor’s creditors.
Looking for Help With a Business Succession Plan? Talk to a Lawyer Now
When it comes to your business succession plan, your specific needs will determine what that plan will look like. To ensure your unique concerns are addressed and that your plan is solid, you need assistance from a committed estate planning lawyer. The North Carolina business lawyers at Mullen Holland & Cooper would be honored to help you figure out the right succession plan for your business. Contact us today for more information on our services.