Legacy is important. It’s crucial. It’s part of the reason we draft wills. And while it’s a given that caring for legacy is part of what we do when it comes to family, what about when it comes to the infrastructure and ideas that surround your small business?
“There’s a common misconception that a will is just about distributing financial assets,” said Charley Moore, founder of Rocket Lawyer. But company “owners also need ‘business-wills’ to make sure their businesses can live on, even if they don’t.”
Moore and his colleagues offered some advice on how to make a business will happen, highlighting estate-planning tips that owners can use.
- Address Different Business Structures: When creating a business estate plan, understand the ramifications of the corporate structure you’ve selected. Sole proprietors, partnerships, LLCs, and S-corporations each present different legal challenges.
“It’s important to plan for both disability and death,” said Christopher Johnson, an estate-planning attorney who consults with Moore’s company. “For sole proprietorships and single-owner LLCs and corporations, make sure you’ve given thought to who could take over for you, and how they would do it. This can be done with durable powers of attorney and trusts, and making sure the agent or trustee can handle your business or hand it off to competent people.
“For entities with multiple owners, be sure you have a buy-sell agreement with the other owners and that it coordinates with your LLC operating agreement or corporation’s by-laws,” he said. “If you have an S-corporation, be sure to have ‘qualified subchapter S trust’ language in your trust to keep its tax status. And if you have a trust, be sure to transfer your company to the trust. You can use an assignment form, or re-issue the shares or units in the trust name.”
- Create a Buy-Sell Agreement: This document details what happens should a principal member of the team leave the business, either voluntarily because of sickness or death.
- Pick a Knowledgeable Heir: To protect your business in the future you need to designate a successor. Remember, no one knows your business better than you right now, but the next owner has to fill that role — so make sure the heir to your legacy has the smarts and know-how to run things in your place.
- Death & Taxes: Whether you own your business yourself or share it with partners, consult an accountant, as the IRS offers tax breaks for death and estate taxes.
A new survey by Rocket Lawyer showed that 93% of those polled were unaware or misinformed about what would happen to their digital assets should they die.
Don’t leave the decisions about your business’s digital details to someone outside the loop. From your company’s Twitter account to the intellectual property sitting in your servers, each component of the increasingly cloud-based way we work is part of a well-crafted will.