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Why business owners need estate plans

Colorado business owners and others throughout the country may benefit from including their companies in their estate plan. For instance, thinking about an estate plan may make it easier to create a succession plan. This may include training a new generation of leaders or creating a manager role that is separate from the new owner. Succession planning may also mean bringing in outsiders to help run the business.

It is important to know that a succession plan may take up to a decade to fully implement. Therefore, it could be harder to carry out such a plan on a whim after an owner passes. Having an estate plan may allow a business owner to create a buy or sell agreement. When an owner passes, the other owners have the right to buy his or her share of the company. It may also be possible to ensure that family members don't become owners after the current one passes.

Having an estate plan that takes a business into account may be ideal from a tax perspective. Creating a limited liability family corporation or limited partnership may provide greater tax efficiency. In some cases, parts of the company can be given to future generations, and it may be possible to avoid paying tax on that transfer.

An individual can benefit from estate planning as early as age 18. This may be true whether or not a person owns a business. However, business owners may be able to take steps to increase the odds that their companies are led by the right people by creating succession plans or by forming family corporations. It might also be possible to transfer a financial interest in the company through a trust or similar document. An attorney may be helpful in creating an estate plan.

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