Owning your own business has long been part of the American dream. If you are a small business owner, or are planning to become an entrepreneur in the near future, it is imperative that you incorporate business planning into your comprehensive estate plan. Failing to plan ahead could result in an unsuccessful transition to the next generation for your business. It could also mean that your loved ones do not receive the full value of your interest in the business if something happens to you.
The best way to ensure that your business is properly incorporated into your estate plan is to work closely with an Illinois estate planning attorney. In the meantime, however, the business planning attorneys at Nash, Nash, Bean & Ford, LLP have prepared a business planning checklist for you to consider.
- Decide whether your business will be passed down or sold upon your incapacity, retirement, or death.
- Ensure that your business structure is conducive to your plans for the disposition of the business upon your incapacity, retirement, or death.
If You Plan to Pass Down the Business
- Choose a successor if you plan to pass down the business.
- Discuss your plans with your successor and the rest of the family.
- Discuss your plans with employees and customers.
- Prepare your successor to take over the day to day management of the business.
- If necessary, create a Family Limited Partnership or a Limited Liability Company that will help facilitate both the legal and practical transfer of ownership.
- Begin making gifts of interest in the business to your designated successor.
If You Plan to Sell Your Interest
- Arrange a buyer if you plan to sell your interest upon your incapacity, retirement, or death.
- Execute a buy-sell agreement.
- Define the “triggering events” that will activate the terms of the buy-sell agreement.
- Decide how the value of your interest will be determined.
- Decide how the purchase of your interest will be financed if the buyer is a partner.
- Make sure that you know what tax exposure the transfer of your interest will trigger.
- Make sure the business has sufficient liquid assets available to cover any tax liability that arises during the transfer or sale of your interest.
- Make sure you will retain a sufficient income stream, or walk away with a sufficient lump sum, for your retirement.
- Consider creating a revocable living trust that will provide for the immediate transfer of control to a designated successor in the event of your incapacity so here is no lapse in the generation of income.
- Incorporate all of these decisions into a business succession planning component within your overall estate plan.
For additional assistance with business succession planning in the State of Illinois, contact the experienced Illinois estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.