Running a successful business requires foresight and planning. While owners often focus on immediate goals, preparing for the future when they are not around is just as important. Estate and business succession planning are essential to protecting your hard work and ensuring your business thrives beyond your involvement.
At BrewerLong, we provide tailored legal guidance to help business owners navigate these processes. Our relationship-focused approach ensures clients receive clear, actionable advice and regular support. Contact us to speak with an Orlando estate planning lawyer today.
What Is Estate Planning?
Estate planning involves organizing your assets and creating instructions for who should take ownership of them after your death. An estate plan typically involves instructions to manage your property after you die and provisions to cover unexpected events in your lifetime.
What Is Business Succession Planning?
Business succession planning involves preparing to transition business ownership and management. Succession plans typically involve:
- Identifying and training successors to effectively transfer leadership,
- Determining who will own the business after you leave,
- Establishing procedures to assess the company’s worth,
- Outlining terms for a potential sale, and
- Setting up insurance policies and emergency protocols.
Succession planning enables the business to continue even if you no longer run it.
Estate Plans in General
Estate planning involves preparing paperwork and processes to transfer your assets after death.
Estate plans often involve a combination of:
- A will,
- One or more trusts,
- Life insurance and retirement account beneficiary designations,
- Powers of attorney, and
- Advance care directives.
For business owners, an estate plan must address not only personal assets but also the business’s future.
Effective Estate Planning for Business Owners
Creating an effective estate plan for your business involves:
- A will,
- One or more trusts,
- Other non-probate estate planning tools, and
- Powers of attorney and healthcare directives.
Coordinate your plan with your succession plan to make both as effective as possible. Ensure you regularly update your estate plan and communicate with family members, business partners, and key players in your estate and succession plans to set clear expectations.
Wills
A will provides detailed instructions about how to distribute your assets. The property you pass using your will must go through the probate court process, however, so most estate plans combine a will with other tools.
Trusts
Trusts are legal arrangements where a trustee manages assets for the benefit of designated beneficiaries. For business owners, trusts can be critical to transferring business interests smoothly. Trusts do not have to go through probate, making them a powerful tool to avoid probate-related delays that can harm businesses.
Tax Planning and Optimization
Businesses are subject to different and reporting requirements than individuals. Without proper planning, estate taxes can significantly reduce the value of a business passed on to heirs. Estate planning allows business owners to minimize these taxes through strategies like lifetime gifting, life insurance, or using trusts, preserving the value of the business for the next generation.
Buy-Sell Agreements
Buy-sell agreements detail how to transfer ownership interests upon an owner’s death or departure from the company. These agreements often detail specific processes and include a valuation method to minimize uncertainty about the value of business interests. They are essential estate and succession planning for business owners with co-owners or partners.
Other Non-Probate Estate Planning Tools
Many business owners benefit from other estate planning tools that bypass probate, including:
- Life insurance—provides liquidity to cover expenses and may help fund buy-sell agreements;
- Retirement benefits—offer tax-deferred growth;
- Transfer-on-death (TOD) designations—can be used to designate beneficiaries for business securities, such as stocks or bonds; and
- Payable-on-death (POD) accounts—establish an account for the business’s operating funds or personal assets, naming beneficiaries to inherit the account balance.
When combined with a will and one or more trusts, these tools help business owners create a comprehensive plan.
Powers of Attorney and Healthcare Directives
Through a power of attorney, you designate a trusted individual to manage your financial matters, legal matters, or both. Healthcare directives outline what medical treatment you prefer in various situations and may appoint someone to make certain healthcare decisions for you.
Creating a financial power of attorney is particularly crucial to ensure someone has the authority to continue business operations. Both become active if you become unable to communicate your wishes.
Why Coordinating Plans Is Crucial
Failing to align estate and succession plans can lead to serious complications, such as:
- Delays in transferring business ownership;
- Lack of leadership or anyone with the authority to make business decisions;
- Family members or heirs inheriting the business without the necessary skills or experience to run it;
- Disputes arising among or between business partners or heirs over the business;
- Increased estate taxes or financial burden on heirs;
- Lack of clarity on the business’s future direction;
- Disagreements over asset distribution; and
- Competing claims between heirs and business partners to business assets.
As a result, the business may experience disruptions, delays in decision-making, and loss of value. Relationships with clients and vendors may suffer, your loved ones may need to sell business assets, and your loved ones and business partners may experience financial instability. In severe cases, they may be forced to sell or shut down your business entirely.
Coordinating estate and business succession plans ensures that your family and company remain stable and secure.
Unique Estate Planning for Business Owners Challenges
Business owners, especially family-owned and closely held companies, often face unique estate planning challenges. Estate planning for small business owners must address not just your personal assets and liabilities but also the entity’s assets, liabilities, and relationships.
These challenges vary by your role at the business, too—particularly whether you are a sole owner or among multiple owners.
Continuity
For businesses, the owner is often central to daily operations. A comprehensive, interwoven estate and succession plan ensures the business can continue functioning without the central owner. Without a clear plan, the company may face instability, potentially affecting employees, clients, and profits.
Governance
Business owners often operate with significantly less formality than large companies. Establishing clear business structures and policies is frequently a core part of estate planning for businesses. You formally address issues like roles and responsibilities, ownership transfers and sales, how the business operates, and how to wrap up business activities.
Valuation
Determining the value of business assets can be complex, especially for closely held businesses or intangible assets like goodwill. Through estate and succession planning, you can establish a valuation method. This method may involve professional appraisals or a formula in the business’s governing documents or the owner’s estate plan.
Employee Protection
Business owners typically have deep relationships with employees, especially in family-owned businesses. Estate plans can include provisions to protect employees, ensuring job security and business continuity.
Beneficiary Disputes
On the personal side, for businesses, especially family-owned businesses, an unclear or nonexistent estate plan may be particularly likely to lead to an increased risk of conflict during estate administration. Disagreements over who should manage or inherit the business can seriously strain relationships.
Employee and Partner Disputes
On the business side, employees who have been integral to the company’s success may expect certain benefits or positions. In contrast, business partners or stakeholders may have differing views on the company’s future. To the extent possible, estate planning for small business owners involves anticipating these conflicts and either preventing them or establishing processes to resolve them.
Hiring a BrewerLong Estate Planning Attorney in Orlando
At BrewerLong, we understand the unique challenges small business owners face. Our attorneys provide clear guidance and actionable solutions, helping clients protect their legacies and achieve peace of mind.
We pride ourselves on our relationship-focused approach. By listening first and understanding your goals, we deliver personalized legal services that prioritize your interests.
Your business deserves thoughtful planning to ensure its success for generations to come. Contact BrewerLong today to speak with an estate planning attorney in Orlando and start building efficient, comprehensive estate and succession plans.