America was founded on the entrepreneurial spirit and it still lives in many Americans today. If you are one of the entrepreneurs, chances are you have worked long and hard to make your business a success. To ensure that it lives on even after your death or incapacity, you need a well drafted succession plan within your overall estate plan.
Unfortunately, many people who own a sole proprietorship fail to see the need for a formal succession plan. This often leads to a legal nightmare when the owner dies at best, and the complete failure of the business at worst. Although you can, in theory, gift your business to someone in your Last Will and Testament, your Will is not usually the best way to accomplish the transfer. Moreover, your Will does not cover a situation wherein you become incapacitated. For these reasons, and many more, a more extensive business succession plan is needed.
If you own an interest in a partnership, a Will is even less effective as a succession plan method. Typically, your goal is not to just transfer your interest to another partner but to sell your interest so that your partners can continue in the business and your loved ones will receive the cash value of your interest. To effectuate this, many partnerships use a “buy-sell” agreement.
If you own an interest in any type of business, be sure to discuss the need for a business succession plan with your estate planning attorney early on to ensure that your loved ones are protected in the event that something happens to you.
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