If you are a small business owner, do you have plans in place to take care of your business and/or minimize estate taxes in the event of your incapacitation or death? For most small business owners today, the answer to this question is no. But, this article discusses why the answer should be yes and why estate planning for small business owners is extremely important.

Why Estate Planning is Important

For Small Businesses

Small business owners have a more complicated situation when it comes to estate planning because they have a business to think of and must plan for the continued operation of that business in the event they become incapacitated or die.

Your business is probably your largest single asset. Therefore, it needs to be integrated into your overall estate plan. Integration with your estate plan is important for several reasons, but most importantly:

1. To ensure the continued operation, management, or transfer of the business in your incapacity or upon your death; and
2. To minimize estate transfer taxes.

Ensuring The Continuation

of Your Business

Consider this––what would happen to your business if you become incapacitated and not able to run the business, handle payroll, sign checks, and manage the business on a day-to-day basis? Who’s going to do these things in your absence? Is there presently a plan in place that gives this person lawful authority to run your business?

Furthermore, what happens if you die unexpectedly while still owning the business? There will probably still be value in the business, but how will it continue to be operated, passed on to others, or sold so that your family can benefit from the hard work that you put into it over the years? Should this happen, is there a plan in place that will work under the law to carry out your wishes?

For most small business owners there is no proper plan in place and this is can be a huge problem, especially if much of your net worth is tied up in the business.

Minimizing Estate Transfer Taxes

According to some studies as many as 70% of small and family-owned businesses fail to survive from one generation to the next. For some small businesses, a significant reason for this is the IRS and the crushing impact that estate taxes can have on that business’s future when the IRS comes calling.

The estate tax rate can be as high as 40% and, absent any deferral, will be due 9 months from the death of the business owner. This means that a taxable estate with a worth of $6 million dollars would incur an estate tax of $2.4 million, which would be due in 9 months. This is like a hidden liability on the business’s balance sheet. Fortunately, the estate tax exemption is high right now, but is subject to change based upon the political winds.

It’s difficult enough for a small business to compete and grow in today’s competitive environment, but how much more difficult will it be for a small business to generate that much liquidity in that short amount of time?

As a business owner, you owe it to yourself and your loved ones to make sure that you have plans in place to ensure the continued operation, management, or transfer of the business in your incapacity or upon your death and to minimize estate transfer taxes.

How An Experienced

Florida Estate Planning Attorney

Can Help

Fortunately, there are significant estate planning strategies available to help small business owners in Florida achieve their estate planning goals. Some examples include:

• Powers of Attorney – allows you to name someone with the business savvy to effectively manage your business and protect your interests when you are incapacitated.
• Partnership Agreements – can be useful when there are multiple partners involved in the business. Such agreements can pre-determine what should happen in case of death or retirement of one of the partners.
• Trusts – can allow your business interest to be transferred to your beneficiaries after you die, without any delay or bureaucracy and without any disruption to the business.
• A Buy/Sell Agreement – will allow business stakeholders to retain or assume control of your business after you die, while also allowing you to pass on your own stake in the business to your beneficiaries.
• A Cost Effective Insurance Policy – when combined with your buy/sell agreement, can provide you with both the method and the means to implement and fund your intentions.

An experienced estate planning attorney can show you not only how to use these tools to ensure the continued operation of your business and minimize estate transfer taxes, but can also help you integrate them into your overall plan in a way that accomplishes all of your estate planning goals.

Contact Lynchard & Seely, PLLC:

Florida Estate Planning Attorneys

For more information regarding estate planning for small business owners, contact an experienced Florida estate planning attorney to arrange a free consultation where you can discuss how to protect your business and meet your estate planning goals. Contact Lynchard & Seely, PLLC,  either here online or by calling 1-850-936-9385, to arrange a consultation with one of our expert Florida estate planning attorneys.