What Small Business Owners Should Know about Estate Planning

Estate planning: it’s not about landscaping your front garden. Most startup and small business owners ignore estate planning or don’t bother to learn much about it in the first place. Estate planning refers to establishing a line of succession for your business. If the owner of the business is still young and ambitious with loads of plans for the future, the succession of the company is probably not the foremost thing in the mind. But life is unpredictable. Business is even more so. Therefore, it’s really important for businesses to devise an estate planning strategy at the start.

What is Estate Planning?

There are several ways a small business owner can go about estate planning. The succession of a company can be secured via a financial power of attorney, last will or testament, or by a living trust. It’s important to note that death is not the only reason that a company may have to pass on ownership. If the owner gets severely sick, like getting treatment for a life-threatening injury, or has to be absent for a while, like going on a long vacation, the succession must be secure. If a sole owner does not specify a successor, then the company could end up in chaos if something happens to the sole owner. That is probably not something any responsible owner wishes for a successful company.

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Estate planning usually occurs when a business gets off the ground after the initial phase of securing funding and getting the product on the market. A business can conduct a company-wide review to find out how to go about estate planning. It’s possible that even a small business is owned by multiple people. A person could own a majority stake in a business and others could own some sections. Therefore, it can be helpful to obtain consultant recommendations, as those provided by Global Resources Business Reviews, before commencing estate planning.

How to Secure Succession for a Business?

The company owner should decide on the line of succession. Giving another person the financial power of attorney enables that person to be responsible for company finances in case the owner is absent to make these decisions. Financial power of attorney is different from hiring a CFO for the business. A CFO’s duty is to oversee how financial transactions are handled in the company. The CFO is not ultimately responsible for the decisions that go into these transactions. A CFO doesn’t necessarily decide what the company should acquire, the worth of the company, or how much to pay employees without direction from the owner or the top executive. The person with the financial power of attorney has this executive authority.

Hiring Attorneys or Experts

Writing a last will or establishing a living trust enables the owner to decide who gets the company after him or her. The company can be segmented and have multiple people claim ownership. These are, however, delicate matters that should be discussed thoroughly with attorneys and business experts beforehand.

You will have to consult with business attorneys to set up a succession plan. It’s also recommended to get expert advice from a managerial consultant who knows how estate planning works. Once you are knowledgeable about the subject, you will be able to hire the right people to handle the job.