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Have you thought about what would happen to your business if something unexpected happened to you? This isn’t a pleasant thought, but it is inevitable, and everyone must take proper precautions. Business owners in particular should write a will.
Business ownership, distribution of assets, and taxes can become complicated legal situations if you don’t write a will laying out your terms and conditions. Every business owner should make a will and plan for the unexpected future.
Writing a Will Ensures That the Business Goes to the Right Person
Business owners should decide who they want to run their business in the future when they step down from their position or pass away unexpectedly.
While nobody likes the thought of giving up their business, it is always better to ensure that it goes to the right person. In this way, operations will continue to run smoothly and your business won’t die down.
When picking an heir, you have to make sure he or she is capable of running your business. It can either be an employee or a family member who is well-versed in the business operations.
There are a few points to consider depending on whether your business is tied to your family or if it is purely an investment business.
If you run a family business, you should consider if a person in the family is willing to take over. You should also look into whether the structure of your company permits this transfer of title.
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In the case of investment businesses, you should check if the person you have chosen to take over has enough capital to fund the purchase of your business.
Owners can also choose to train a certain employee or person to run the business in future.
The plans for the succession of your business, including the person you will be entrusting it to, should be laid out on paper with all the terms and conditions.
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A Will Helps Continue Business Operations
A succession plan is essential to ensure all the business operations continue to run smoothly.
If you don’t write a business will, your business could end due to reasons like frozen bank accounts and delayed rent payments.
In the case of an owner-dependent model, where the business requires your direct supervision, writing a will is necessary to make it clear whether you want to close your business or transfer it to a family member.
You don’t have to go through a lot of trouble to make your will. This is because you can easily draft one online. Many business owners use ELM Legal Services to make their last will and testament. After drafting your will, you can access it on any device or obtain a digital copy.
Do You Need a Buy-Share Agreement in Your Will?
If you are a part-owner in your business, or co-own a business that is an LLC or corporation, a buy-share agreement is necessary. This agreement will lay out what will happen to your share once you die.
The company can either choose to purchase your share or follow other paths. For example, they could turn the buyout agreement into a business continuation or succession plan.
In the absence of a will, the management may not necessarily follow your wishes regarding your share in the company.
Consider the Tax Ramifications When You Write Your Will
There are tax guidelines you should take into account while writing your will.
Transferring your business to its heir in the form of regular gifts can help reduce the inheritance tax liability at the time of your death. However, this could also lead to a capital gains tax liability.
If your business has no worth after your death and no family member wants to take over, you should lay down instructions for its closing. This can prevent your heirs from receiving a tax bill.
This inheritance tax could be a huge burden on your family if you fail to lay down proper instructions for the distribution of your assets in your will.
Writing a Will Helps Support Your Family
By writing a will, you can help support your family with the money from your business.
A will can reduce probate loan fees, especially if details regarding the distribution of assets among the family members are specified.
If you have children, you can consider equalizing your estate depending upon who wants to be engaged in the business.
Creating a buy-sell agreement for both family members and non-family members who hold shares in the company will minimize many legal complications.
Choose an Executor to Carry out Your Instructions in Your Will
You have the freedom to choose a person to serve as executor who will carry out the instructions laid down in your will.
He or she will be responsible for the distribution of the assets, paying off any debts, taking care of your taxes, and transferring or closing your business with minimum loss.
If there is no will, the court will choose the executor, usually one of the surviving family members. This might not be the best choice especially if the family member doesn’t know anything about the business.
Writing a Will Protects Your Privacy
In the absence of a will, the probate process will make all your financial information public. Anyone can then manipulate this information to learn about your assets.
To make sure this doesn’t happen, it is always better to write a will. This will ensure that only people you trust can access confidential information.
Avoid Complicated Legal Situations by Writing a Will
There is already going to be a ton of paperwork your family will have to complete and file after you die. Not writing a will can make things even more complicated.
A will can help streamline the process of estate administration. Family conflicts regarding your estate will also be avoided if a will is present. This can prevent unnecessary court cases and legal expenses.
Your family will have enough to deal with after your death. Additional paperwork will only impose more stress on them.
Don’t Wait to Write Your Will
You don’t have to wait till you are old and near retirement to write a will. Do it as early as possible so you can be at peace about the future of your business. If required, seek professional help in writing your will.
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