When you own a business, it’s critically important to have a will to protect your wishes and ensure you have a sound succession plan in case you pass away before you retire or sell the company.
With a will, you can specify the individuals you would like to inherit your assets and property, including your business. Failing to take this step means the intestacy law and possibly a court will decide who assumes ownership — and it will likely be your closest relative. If you do not want that person to receive your business after your passing, a will gives you the opportunity make the succession of ownership clear and easy to manage for your estate’s executor.
In addition to a will, you should also establish a business buy-sell agreement, especially if you own a company with one or more business partners. This agreement outlines a protocol for what will happen to your ownership stake if you pass away. For example, you may give your partners an opportunity to buy out your shares from the individuals who inherit them.
Many businesses opt to take out life insurance policies on each of the owners, with the proceeds reserved for purchasing deceased owners’ shares. If you choose this route, you are creating a business continuation plan, because the company will continue to operate largely as is after an owner’s death. On the other hand, passing on a business to a loved one signifies a business succession plan.
For further guidance on how you can effectively manage business succession issues as part of your estate planning process, consult a dedicated Pittsburgh business law attorney at Feldstein Grinberg Lang & McKee, P.C.