When you own a business, you’re responsible for overseeing every aspect of its daily operations. With many different tasks demanding your attention each day, it can be difficult to look ahead to the future. However, preparing for what will happen to the company once you pass away is a top priority. Estate planning will ensure your loved ones and business partners can settle your affairs smoothly. Below are a few key steps to take when creating a plan for a business. 

Estate Planning Strategies for Business Owners

1. Focus on Minimizing Taxes

After a business owner passes away, estate taxes often equal a large percentage of the company’s total value. Typically, these are due within nine months after the death. Estate planning allows you to minimize the taxes owed. Taking advantage of IRS tax breaks and deferring payments can alleviate the burden of paying a significant amount in a short time. 

2. Create a Buy-Sell Agreement

If you have business partners, a buy-sell agreement establishes a plan for the company should one owner pass away or become incapacitated. It defines a sale price for the business and your share, as well as leaves instructions on whether you want the other owners to buy out your share or prefer family members to take over.

3. Consider Life Insurance 

It’s common practice for each owner of a business to purchase a life insurance policy and name the other partners as beneficiaries. In the event of your passing, this will provide the surviving owners with the tax-free funds necessary to buy out your share according to the terms of the buy-sell agreement. Have a separate life insurance policy that names your family members as beneficiaries. A buy-sell agreement will take time to complete, and a life insurance payout will keep loved ones from facing financial difficulties in the meantime. 

4. Outline a Succession Plan 

If you’re a sole proprietor and wish to pass on the business, a succession plan will prepare someone else to take over. This should clearly outline how operations are run and delegate certain responsibilities and authority to successors. The idea is to make sure the business is transferred to the new owner with minimal interruption. 

Putting together an estate plan for your business will protect everything you’ve worked so hard to accomplish. For guidance in developing a solid, actionable plan, contact Upstate Legal Center of John V. Shepard. Offering over three decades of experience, he has helped numerous Rochester, NY, entrepreneurs properly prepare for the future. He will ensure you choose all the right legal documents to suit the specific needs of the company. Call (585) 429-5422 to schedule a consultation, or visit his website for more information on the estate planning services he provides.