If you are an entrepreneur, a large part of your estate plan deals with what will happen to your business when you are no longer willing or able to run it. A recent article discusses several estate planning tips for entrepreneurs who run owner-dependent businesses.
If you have not drafted your estate plan yet, begin with a consideration of your business management philosophy. Typically, the management philosophy of an owner-dependent business is to generate as much income as possible for the founder to utilize as income and retirement savings. These businesses are not expected to last past the founder’s death.
For these businesses, owners should gradually decline the amount of money that they reinvest into the business as they get older, retaining more income for themselves as they near retirement. It is not important to train new management, so the owner does not need to exert any effort in developing a new management team.
Even if you plan for your business to end at your death, it is important to establish a plan for your business nonetheless. First, document your intent to have the business dissolve after your death. Second, speak with your family about taking out a continued liability insurance policy on the business. This will limit any liability against your family by reducing the amount of time during which former clients or customers can bring a legal action based on the business.
For assistance in estate planning for your business, contact us at (626) 696-3145.
