Most folks know enough to think about a personal will at some point. But what kind of planning should a small-business owner do to protect the company into the future?
"The transition from founder to next generation in the family, or to a professional successor, is always a point of risk," says Charley Moore, founder of the free online legal assistance service RocketLawyer. "But it can be managed. Ideally, it starts with the founder thinking about and executing an estate plan."
Have you created an estate plan for the company you've founded? Have you ensured that your hard work will pay off for your family? Do you know that the right people will step in to take your company's reins?
Check out our short list below and make some moves now to have your business's transition plan in place in the future.
Appoint a trustee for business continuity. First, specify to whom and how your small business will be passed along. Moore suggests that your plan include placing the business into a trust at the beginning of the transition process. Appointing a professional trustee will prevent disputes from taking place. It can also save a great deal of grief, as well as preserve the continuity of your business's operations during what is bound to be a difficult time.
Identify the next leader and inform your family. Moore says that one of the biggest mistakes people make is to designate a family member as a trustee or the executor. At the very least, this can open the door to problems.
The future of a small business relies on its post-founder leadership. That leadership has to be in the hands of someone who knows its ins and outs. If that person is not in your family, make sure you include clear information in your estate plan about who is to take on the leadership role.
Sometimes, this decision can bruise already vulnerable feelings, so it's helpful to include a clear explanation of your decision in your plan. By creating an environment that's overseen by an impartial third party, you establish a businesslike means for a trustee to handle potential pushback.
Specify the future of assets. A crucial element of small-business estate planning is designating which business assets are to remain in the control of the company's next leadership and which are meant for the next of kin.
Moore points out that certain digital assets, Twitter and Facebook accounts, for example, can be critical to the day-to-day success of a small shop. Specify whether those assets belong to the business, and if any do not. Note, as well, which stakeholders need to be paid for their involvement in the company.
In some cases, you'll want to place stipulations on what assets may be liquidated by the parties who take receipt.
"Forty-eight percent of adults don't have a will," Moore says. For small-business owners, not having a will means a financial liability for the next of kin. It can threaten the legacy of the very company an owner leaves behind.
Many online templates and resources exist to help you with creating an estate plan (Moore's RocketLawyer is just one of them). Planning for small businesses can be free, quick and relatively easy.
Take the time to make the plan. Protect your future so that you can stay focused on running your small business in the present.
James O'Brien is a correspondent for The Boston Globe, The Consumer Chronicle and Boston University's Research magazine. He blogs for Contently.
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