How is a Business Affected by the Death of the Owner?

As a business owner, it is important to consider what will happen to your business if you were to pass away. While it is an unpleasant reality to consider, none of us know which day will be our last. Unexpected tragedies happen every day. Therefore, planning for what will happen to your business should you as the business owner pass away is crucial. A key element in this process is creating a comprehensive estate plan.

What Happens to a Business if the Owner Dies or Becomes Incapacitated?

As we have discussed in previous blogs, preparation is an essential component to business success. Preparing for the death or incapacitation of the business owner is important for business reasons as well as estate planning purposes. The way that a business is affected by the death of the owner depends, in large part, on how the business is structured. Sole proprietorships terminate upon the owner’s death. Limited liability companies (LLCs) and corporations continue to exist after the owner passes away. The owner’s share of the business will pass to heirs in accordance with his or her estate plans.

Estate Planning for Business Owners

If you own a business, the importance of proper estate planning cannot be overstated. Not only does careful estate planning help ensure that your business continues to be successful after your death, it also saves your surviving loved ones from the heavy burden of making business decisions for you. A last will and testament is considered the most basic estate planning tool to have in place, however, a will alone is often insufficient for business owners. You may also want to consider setting up a living trust. Through a living trust, you designate a successor to take control of the business upon your death.

Assets held in trusts typically avoid probate, and there may also be certain tax advantages associated with using a trust.  A buy-sell agreement is often useful for businesses with multiple owners. Through a buy-sell agreement, you can give the other partners the option to purchase your shares of the business upon your death. These are just a few of the estate planning instruments that may be useful for business owners. The specific estate planning tools and strategies that are right for you will depend on the type of business you own, who you want to pass the business down to, and several other factors.

Call Us for Personalized Estate Planning Guidance

If you own a business, it is extremely important that you prepare for what will happen to your business if you pass away. Failure to properly prepare can be detrimental to your business. For help, contact a Naperville estate planning lawyer at The Gierach Law Firm. Call 630-228-9413 for a consultation. We also offer free, downloadable estate planning guides that provide a wealth of additional estate planning information.

Source:

Chron