There are around 30 million small businesses in the United States. That means there are 30 million small business owners as well. You might be one of them.
Whether you’re self-employed or you have employees, your business is your livelihood. It may also be your passion.
Like other small business owners, you may not have thought much about estate planning. Building your business may seem more important. Planning for the future is important though, and this is doubly true for a small business owner.
If you’re just setting out on your planning journey, start with these five tips.
1. Estate Planning Starts with a Will
Many people don’t have a will, which can cause issues for their heirs later on. For a business owner, it can be even more of an issue.
Your will helps direct what happens to your assets. Your business is part of those assets. The will tells your executor how to distribute assets associated with the business.
This can include digital assets, such as email addresses and online bank accounts.
2. Plan for Taxes
Tax planning for small business is something you think about on a regular basis. Did you ever think about how the business would be taxed if you were unable to continue at the helm?
Estate taxes can force your heirs to sell a business. Taxes may be quite high. A lack of liquid funding and a short time to pay could spell the end of the business.
Small business estate planning can help you take advantage of tax breaks. You can also consider a charitable trust to build tax efficiency into the plan.
3. Declare a Power of Attorney
Estate planning doesn’t need to focus on what happens to the estate in the event of a death. There may be other reasons you can’t return to your business, such as an accident or illness.
A small business owner should be sure to name someone who can act on their behalf. As the experts at Patino Law Firm can tell you, the power of attorney is important when illness or injury is at play.
The power of attorney may even be crucial to keeping your business running.
4. Add Life Insurance
As we mentioned above, business often don’t have much in the way of liquid funds. This can be a problem when it comes to paying estate taxes or even keeping the doors open.
A life insurance policy could solve this problem for small business owners. A life insurance policy can pay out funds, which could keep the business afloat until a sale is made.
5. Create a Succession Plan
Who will head the business after you leave?
It’s a wise idea to have a succession plan in place. Think of it as part of your retirement plan.
This is one of the most important estate planning tips, because it gives your heirs directions for what to do with the business. Without a succession plan, people may compete to become the next owner or business leader.
With a succession plan in place, you can also begin training the next leader.
Start Your Estate Plan Now
It’s easy to see why estate planning takes on new importance when you’re a business owner. If you haven’t started your estate plan just yet, it’s easy to get started.
Are you looking for more great advice about entrepreneurship? Look no further than our blog.