An important part of running a small business is planning for its future. Making estate law decisions about whether and how your enterprise continues when you are no longer at the helm gives peace of mind to you and everyone affected. The questions and answers below might help you create an estate plan now that eliminates confusion and disagreements later.

Estate Law for Small Business Owners

Are there ways to defer or minimize estate taxes?

Yes. Internal Revenue Code (IRC) Section 6166 allows a personal representative to defer payment of estate taxes. The small business must be engaged in manufacturing, mercantile, or service activity, and the interest must be more than 35% of the deceased person’s adjusted gross estate. Under IRC Section 303, your estate has a one-time opportunity to redeem your stock at a low tax cost. The value of the stock must be greater than 35% of your estate.

What is a buy-sell agreement?

A buy-sell agreement is a contract between business partners or shareholders that states a plan for continuing the business when an owner becomes unable or unwilling to operate the business or passes away. As a business owner, you benefit from this arrangement because it establishes a firm and fair price for your share of the business and the whole enterprise when there is no pressure or a need to sell.

What should I consider when only two of my three children are involved in my family-owned business?

One estate law consideration is how you want to distribute the assets. If two children are active and want to take over the business, consider whether you want to give your third, uninvolved child an equal share, have the other two buy out their sibling, or do something else.

How can life insurance policies help in estate planning?

Each business partner can purchase a life insurance policy naming the other partners as beneficiaries. The surviving partners receive the policy proceeds tax-free outside of probate and use the funds to buy the business from the deceased partner’s estate. 

When planning for the future of your small business, an estate law attorney will provide counsel and representation to ensure you implement your decisions effectively. The legal team at Kratovil Law Office, PLLC offers more than 40 years of combined estate planning experience, assisting clients to achieve peace of mind in running their businesses. Based in Charles Town, WV, they serve small business owners throughout the state’s Eastern Panhandle. Call (304) 728-7718 to schedule a consultation or visit them online now to learn more about their services.