HAVING A BUSINESS SUCCESSION PLAN IN PLACE IS ESSENTIAL
April 24, 2020
Life is a game of chance, and no one knows when their last day will be. That's why it's important for everyone, regardless of their age, to have an estate plan in place. This is even more important if you own your own business here in Dayton. If you have your own company and something suddenly happens to you, then an Ohio probate judge may end up deciding what happens to your family business instead of you. You can greatly reduce the chance of this happening by putting a business succession plan in place.
Many factors that may motivate you to pursue business succession planning.
If you familiarize yourself with tax considerations, then you'll likely discover that your company's tax liability is likely to grow during the probate process. You can avoid this through business succession planning.
You may also find that one of the best things that you can do if your business has multiple partners that own it is to leave your stake in it to the other co-owners.
One way that you can accomplish this by drawing up a buy-sell agreement. You can designate your business partners as eligible to automatically purchase your interest in your Dayton business when you're gone by doing this. Your spouse and other heirs won't inherit a business that they didn't want or know how to manage if you do this. If you're concerned about liquidity, then you can purchase a life insurance policy and set up an irrevocable life insurance trust (ILIT). This can be used to cover the cost of the buy-sell agreement.
If structured correctly, then an ILIT can shield the insurance policy from having to go through probate. There are grantor retained annuity trusts (GRATs) or grantor retained unitrusts (GRUTs) that can be used to avoid an appreciation of the business that would lead the assessment of higher estate taxes as well.
Owning a business can be very complex; however, leaving it behind when you are gone without a proper business succession plan can be far more troubling for your family members and heirs. An experienced attorney can help you plan for your legacy today so that there's a smooth transfer of your business when you're gone.