You’ve worked so hard for the success of your small business, but have you thought about what will happen to it after you’re gone? By planning in advance, the small business owner can ensure that his or her wishes are followed should the unthinkable occur. Not only does this kind of planning make for an easier transition on those left behind, but it also saves money and can literally keep the business from failing altogether.
Your small business is a part of your estate, and just like your home and other assets, planning needs to be done for how it should be handled upon your death. You’ll want to go over your options with a qualified Cornwall and area wills and estates lawyer (as well as your accountant!) and make your decisions legal and binding with proper documentation. Of course, you’ll also want to communicate with those individuals who will be charged with following your wishes and keeping the small business running smoothly.
Unfortunately, the death of a small business owner can also spell the death of the business. Estate administration (also known as probate) taxes and income taxes can be so expensive that the business just can’t survive paying them. Or, the other partners in the business cannot afford to buy the deceased’s share in the business, so the business gets sold to a third party and the profits divided.
Laws like this play a role in the fact that small businesses do not typically survive through the generations. According to The Small Business Review, only about 30% of family businesses make it to the second generation, 12% to the third generation, and 3% to the fourth generation. Obviously, there are a number of factors involved, but the need to pay taxes and take care of other transitional costs creates a significant burden in passing a business on to heirs.
By planning in advance, you can take advantage of tax reduction planning and limit (or avoid) probate taxes. Many of the options available to small business owners can only be utilized before death, not after, so it is important to make plans for your business succession now.
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Michele R.J. Allinotte is the owner of Journey Law in Cornwall, Ontario and she helps her clients make the best decisions for themselves, their families and their businesses. Her practice focuses on the areas of business law, estate planning, and real estate. Visit www.YourCornwallLawyer.com to get her FREE Peace of Mind Personal Inventory to make sure that your family has all the information they need.