As you are discussing things with your estate planning attorney, you may have already started or are considering starting a new business venture. You will have individual estate planning as well as business planning concerns that may have separate sections for estate planning and may be interconnected in some ways. There is no better time to protect your business than at the start of launching a company, but you can still benefit from business succession planning and estate planning if you have already been in business for some time. One of the most important things to protect is your trade name when you launch a company.
The name of a business is one of the issues that is resolved first in launching a new venture, but often, clients don’t give much thought on how to protect that name because they don’t realize that there is much to protect or are too busy with other issues. There is no better time, however, to protect your business’s name at the start of its use, simply because starting a new business doesn’t mean that your firm is automatically protected.
Additional effort is required and may involve other professionals such as an intellectual property attorney in addition to the estate planning professional you are currently working with. Scheduling a consultation directly with an attorney who can advise you about how your individual estate planning and your business succession planning may intersect, is important.
Young entrepreneurs have a variety of different things on their plate, and many of them may be averse to estate planning because they are concerned with dealing with the day-to-day actions of running a business. However, business succession planning, asset protection planning, and estate planning are all a critical component of owning a business.
Typical financial plans include a number of different factors that are all weighted differently depending on your stage in life. These include tax planning, estate planning, investing, and money management. You will also need to prioritize what is most important for you based on your values, desires, and needs. Ensuring that you’re headed in the right direction as a young entrepreneur typically begins by scheduling a team of professionals to help you with all of your various concerns.
Having the support of knowledgeable professionals who have been working in this field for some time can help you avoid many of the most common pitfalls experienced by business owners, including lack of having a succession planning, not separating business from personal assets, and not considering how tax planning and estate planning work together for your individual assets.
Scheduling a consultation with a knowledgeable estate planning attorney is frequently the first step in protecting your best interests and articulating a long-term plan for what will happen to you and your company.
If you currently own a business and are anticipating selling it in the future, you need to look back at your foundational documents including any buy/sell agreements to determine whether or not guidelines are already established.
There are five crucial financial planning areas that you need to consider when planning to sell your business. First of all, you need to articulate your plans for the money, including whether you plan to make major purchases, your future retirement goals and to generate a new vision for your future.
You may also wish to accelerate college funding and charitable giving with college savings plans, or a donor-advised fund. Required cash reserves and estimated taxes should also be in the back of your mind. If you sell early in the year and the tax is not due until April 15th of the year following, you’ll still want to have a long-term game plan for what to do with your taxes.
Key man insurance or personal liability insurance should also be reviewed carefully when it comes time to pass on the business. Many of these policies are owned by the business entity and the business remains the primary beneficiary if the key man passes away. If you are the primary owner of the entity then you have the eligibility to change the beneficiary and the ownership on these policies, and this is a step that you should take as soon as possible to protect yourself.
Do you own a business that has appreciated in value and you are thinking about making an exit plan? For many Americans who own a business, this is a substantial part of their financial future and it may be the time to realize this value in cash. As the economy gets better, more people are looking to buy businesses than ever.
Those individuals with investment capital are looking for good investments instead of the stock market or in conjunction with their stock market plan. However, bear in mind that you have a shadow partner in selling your business; the government, which is ready to take a cut of your sale proceeds as a tax. While an individual business owner can be at a disadvantage in terms of taxes, the organized philanthropy industry has plenty of ability to protect tax advantages.
Saving federal taxes on the sale of a business without any conflict from the government means it necessary to use a charitable tax planning structure. For those individuals who have excess income charitable trust have income tax and estate planning value. Putting together a private charitable foundation can enable you to pass on large amounts of business interest or property while getting an income tax deduction and avoiding the estate tax. Furthermore, you can effectively keep control of the property that has been donated.
One great example is the Gates Foundation. For investors and business owners who want to receive the tax benefits as well as a continuing income, the alternative planning structures put together by an experienced attorney are necessary.
A company that you started with your spouse decades ago may hold sentimental value for you but it also has significant financial value and possible future value if your children or other heirs intend to take it over. There are multiple different things you need to consider in the process of business succession planning for a family-owned business.
Often the emotions and conflicts that are present in a family owned business may be more difficult to deal with, highlighting the importance for an experienced business succession planning attorney. First of all, you must consider exit strategies. You must evaluate whether or not your children have the desire and the qualifications to take it over and to outline the appropriate exit strategy for the family from a financial perspective. Transferring a business can generate major tax implications if you don’t do advance planning.
You might lose 30% or more to taxes which could impact the departing business owner’s retirement. Communication with key employees and family members is another crucial component of business succession planning. Discussing the plan helps remove uncertainty about the business’s future and involving advisors to help with the streamlined process can keep everyone informed and confident. Business succession planning should also coordinate with individual estate planning tools. Transferring assets to children is a common concern for people in this situation but this needs to be done carefully and with the guidance of a lawyer who has worked in this field for many years.
When most people think of estate planning, they are looking at their individual opportunities available with putting together critical documents and strategies to protect them and their loved ones. The truth is however, that if you play a critical role in any business, you can also benefit from estate planning for the company. Without a proper plan in place, you’ll leave many difficult questions to be answered and problems that may arise if you need to suddenly exit the company or if something happens to you. There are five primary reasons why you need to consider the benefits of estate planning in your business.
- It helps ensure the longevity of your business so that your brand lasts well beyond your lifetime.
- It minimizes your taxes since estate taxes can put significant financial problems in front of a business. Transferring business assets to your children is one such example.
- It gives you the option of a buy/sell agreement. Estate panning allows you to use a buy/sell agreement that can be beneficial if you have multiple co-owners of a company. This means that they may be eligible to automatically purchase a deceased owner’s interest in the company and this can prevent unintended beneficiaries from accidentally becoming owners or key players in the business.
- It allows your business to look forward towards the future. Estate planning allows you to look to the future of your business while you’re still around and maintain your message in years to come. Since no one knows what the future holds, estate planning for the business is important.
- It generates a succession plan, if you want to include multiple components in your business succession plan, including strategies to keep the employee, outside directors that may be used to bring objectivity, support training and development of successors and the delegation of responsibility and authority to successors.
Schedule a consultation with an experienced estate planning lawyer to learn more
There are so many different risks to think about and potential growth opportunities affecting entrepreneurs that far too many of them fall prey to missing out on important planning opportunities. One of these includes not preparing for a lawsuit well before it happens. Most entrepreneurs only worry about this after a lawsuit has been filed or after an accident has occurred. However, at this point, options are limited.
Being an entrepreneur comes with a long to-do list, but it’s still important to consider that protecting your risks is a worthwhile endeavor. Asset protection planning is one worthwhile goal.
Some advanced asset protection planning carried out with the assistance of a lawyer can help you. You don’t want to commit what is known as a fraudulent conveyance, such as moving money around to avoid losing it to a lawsuit once the lawsuit has already been filed. The best time to plan for asset protection planning is when there is no risk in sight. If you plan appropriately, you may be able to settle lawsuits for very little compared to the potential exposure.
The crucial aspect of this is having a comprehensive plan drafted by an estate planning attorney so that those assets cannot be taken from you.
The Treasury Department is currently evaluating a proposed regulation that could change how wealthy business owners are eligible to pass on businesses to their children or other heirs. individuals are currently able to discount valuations of stakes in a family owned business to minimize the taxes due upon transfer.
A 40% levy could be applied to estate values greater than $5.49 million. The proposed rule under section 2704 of the Tax Code could eliminate these business valuation discounts and therefore, a critical tax planning strategy that has been referenced by many people who own businesses and are extremely wealthy. According to Treasury Secretary, the IRS and the Treasury believe that these regulations should be completely withdrawn and believe that the rule is unworkable.
The primary aim under the previous presidential administration that created the rule was to prevent people who had a great deal of wealth to put marketable securities into their company much like a limited partnership and then transfer those securities at a discounted valuation. The IRS interpreted this as gaming the systems. As a business owner, you’ll likely have concerns about protecting not just your individual interests, but your business interests, too. Having an estate and transition plan for both is important.
If you have further questions about how to protect your business assets and to do so legally, contact a New Jersey estate planning lawyer today.
Many entrepreneurs have one thing in common: they tend to like to do everything by themselves, at least when the company is started. Over time, however, what tends to separate the extremely successful from the barely surviving is being able to tap into other resources and surrounding the entrepreneurial journey with a team of professional advisors who help him or her implement short and long-term strategy.
Entrepreneurs have unique estate planning needs. In addition to thinking about the future of their own assets, it’s equally important to consider the future of the business, too. Finding the right estate planning attorney can have a big impact on an entrepreneur’s ability to plan. There are five primary tools that most entrepreneurs should consider when putting together their estate and their long-term business planning. Meeting with the right lawyer can help to identify the best opportunities to move forward with estate planning while keeping the future of the company in mind as well.
The top six tools that can help an entrepreneur include:
- A trust
- A buy-sell agreement
- A trust
- Power of attorney
- A will
- A succession plan
In many cases, the estate planning for an entrepreneur may be infused with both individual and business plans. This is why it’s so crucial to identify an attorney who understands that and works to create a comprehensive and personalized plan for the business owner. Having to suddenly exit the business due to incapacity, for example, can raise a lot of questions for the entrepreneur about who is empowered to make medical or financial decisions for the business owner but also how the company will be handled, whether it’s a short or long-term absence.
Entrepreneurs frequently pour their heart and soul into founding and growing a company. Determining the most appropriate way to protect it is equally important. Make sure you identify an estate planning lawyer with experience helping individuals as well as business owners with estate planning and succession planning needs. The right lawyer can give you a lot of peace of mind about the future.
When the Small Business Administration lending partners come across an applicant who has ownership interests or assets inside a trust, the first question made by that lender is whether or not the trustee or the trust itself needs to be a borrower or a guarantor on that loan.
The answer is that if the trust in any way benefits from the loan, then it should be classified as a borrower. However, lenders need to also keep in mind that the answer could be impacted by the actual terms of the trust agreement in addition to any state or federal laws. A trust does not have to meet criteria ‘small’ under SBA regulations in order to qualify for a Small Business Administration loans. Beneficiaries of the trust are not considered for eligibility purposes and they are not also required to be guarantors of a Small Business Administration loan. If the trust owns 20% or more of the small business applicant, then that trust has to guarantee the loan and the trustee should sign the guarantee on behalf of the trust.
Lenders may also need to be aware that certain state laws and the terms of some trust agreements may require that the assets inside the trust can be held in title by the trustee individually rather than in the name of the trust. These issues can be complicated and require the insight of a knowledgeable attorney when you go through the process of putting together your trust itself. Do not hesitate to reach out to a New Jersey estate planning attorney sooner rather than later in order to protect your interests and to understand how these issues could potentially impact this.
The business succession planning strategy of Mark Zuckerberg could have important ramifications for individuals who are approaching retirement and thinking about whether or not it is time to move on.
For example, Sumner Redstone, a multi-billionaire, is currently locked in an argument with trustees and his family over the control of his companies, Viacom and CBS. One of the key takeaways that Sumner and other individuals approaching retirement without a business succession plan can learn from Mark Zuckerberg is that there are key generational differences in the way that entrepreneurs build their companies.
In all situations, it’s in your best interests to avoid winding up in Redstone’s situation. You might assume that exiting the business is so far in the future that you don’t need to worry about it, but this is a mistake. In fact, there are many reasons that you may wish to exit or sell the business outside of death of an owner, and planning ahead for these can make for a smoother transition when the time comes.
A new survey from U.S. Trust found that younger business owners are planning to exit their companies and raising money in ways that are quite different from older generations even though many of their key concerns about eliminating or moving on from their role in the business are the same across generations. The younger generation deals with succession planning in very different ways.
Although two-thirds of current business owners do not have a formal exit strategy, and for the baby boomer population only 52% of younger business owners do not have an exit strategy in place. To learn more about how a business succession plan can help you accomplish goals for your company as well as determine when it time to move on in the future, consult with a New Jersey business succession planning attorney today.
Unfortunately, far too many individuals avoid the process of business succession planning, figuring that they will deal with it at some point in the future. Unfortunately, as many business owners can attest, there are numerous reasons why someone may need to depart a business suddenly. These include disability, death, retirement and other issues. Without having an appropriate business succession plan in place, the business may continue to struggle significantly.
Answer these questions below to learn whether or not your company is appropriately prepared for business succession planning. If you find yourself answering no to the majority of these questions, realize that you are not alone and that you could benefit from a meeting with a business succession planning attorney. Getting things organized now and initiating these processes can help your business significantly and give you a great deal of peace of mind about the future.
- Do you already have an identified successor for all of the key roles in your business?
- Have you defined the vision and the personal goals you have associated with transferring management and ownership of the company?
- Are there any family issues that could impede potential ownership and leadership decisions?
- Does your business succession plan also take into account key estate planning issues such as minimizing estate taxes?
- Do you have appropriate liquidity in the business in order to avoid a forced sale?
- Is there a contingency plan in case an existing business owner becomes unable to work sooner than anticipated?
- Is a buy-sell agreement already developed for transferring assets?
- Have you figured out yet whether or not you or any other individual is depending on the sale of the business to meet cash flow needs in retirement?
- Have you already had a business valuation conducted and viewed your company in the same way that a potential buyer would?
If you have not engaged in this process yet, it is not too late. Consult with a business succession planning attorney to learn more.
Did you know that just over half of all small business owners are aged 50 or above? That’s according to statistics from the U.S. Small Business Administration. How that breaks down to actual numbers is that 28 million individuals who own a small business are at the point of considering transitioning out of their business.
Despite the fact that many small business owners are over age 50, a vast majority of them have not completed the business succession planning process. A whopping 78% of small business owners plan to sell their businesses in order to fund their retirements, but less than one-third of them have an actual written succession plan which could be a recipe for disaster. Individuals who are counting on the sale of the business to fund their retirement completely could find themselves shocked if they have not planned ahead properly. Individuals may be forced to settle the business before it has been properly evaluated by somebody else and it could mean selling the business for less than what it is worth. These are just a handful of the reasons why you need to consider a business succession plan now.
One of the biggest reasons to consider business succession planning now is that you should not count on any traditional plans unless you’ve had the opportunity to talk them over with your loved ones. For example, if you believe that your children are going to take over the business, you should never assume this until you’ve had the opportunity to speak with him directly.
A vast majority of small business owners plan to pass the business down through the family but if there is no one interested or talented enough to take on these key management roles, you could find yourself struggling to find an ideal partner when it is time to plan the transition the business quickly. You should have these conversations early in order to tap ideal individuals well in advance since you may need to develop some of the talent within the company, knowing in advance how you plan to pass it on can help you implement training opportunities now. There has never been a better time than now for business succession planning, both for protecting your family and your company’s future.
Aside from you and any key stakeholders with your company, you may also need to engage with a financial advisor, a business succession expert and a business succession planning attorney. This is because there are many different questions that can arise during the process of determining the right course for your business.
The succession planning team should almost always include the owner’s family, the owner’s advisors, and leadership and management team. This is so that you can have questions answered quickly and determine what individuals will play specific roles in the process of transitioning the business in the future. Do not hesitate to reach out to an experienced business succession planning attorney as soon as you believe that you are prepared to complete this process.
There are numerous questions that need to be answered before you consider putting together your business succession plan and you should also conduct a review of any existing documents such as a buy-selll agreement. These documents can help to dictate what will happen in your business succession planning and give you a firm grounding for where you go from here. Consulting with an attorney and your advisors allows you to accomplish the meaningful goal of business succession planning.
Unfortunately, the majority of family business leaders do not engage in the process of business succession planning. Even if they do engage in it, they might not do it properly or they wait until it’s too late to achieve maximum impact.
The average longevity of a CEO in a non-family business is six years, but CEOs in family-owned businesses usually stay for 20 to 25 years. What follows are several tips for succession planning. It’s important to remember that succession planning can occur at numerous levels throughout the organization and it is important to think at least about the top 5 to 8 positions to put into your written succession plan. Keep these points in mind.
- Think outside of seniority
- Use a professional process of regular performance assessment, skill evaluations, and reviews of career history
- Rank possible successors based on key criteria like learning agility, past work experience, past performance ratings, the ability to take risks, decision-making ability, prior leadership positions, education and problem-solving ability.
- Prepare the next generation with comprehensive planning
- Consider a leader outside of the family
Although this process can be difficult for any family business, it can be made much easier by consulting with a New Jersey business succession planning attorney.
There are several different things that your company can do to make the process of business succession planning that much easier.
Putting together your plan once is not enough as you must be able to revisit this on a regular basis and make potential changes as you see fit. It’s much easier to craft a plan and make small changes as you go rather than having the entire company try to adapt in the event of a sudden owner departure.
Having a long term strategy will make transitions easier when a key individual does depart from the company. Follow these tips to achieve maximum success with business succession planning.
- Track potential successors. Use survey feedback to identify potential leaders who could serve the company in the future. Make sure you identify who has what in the form of critical competencies attributes and skills.
- Communicate with potential candidates. You should never promise them a position necessarily, but you can give them an idea that you are considering them for a future role. This gives them the opportunity to get the most out of training.
- Have an emergency plan. This should be a disciplined step by step approach for training successors quickly and immediately in the event that a business owner is no longer able to do this.
Research from the Small Business Administration indicates that there are over 3.7 million small businesses owned by veterans across the country. These make up approximately 9% of U.S. companies overall. Entrepreneurs and veteran business owners certainly make important contributions to growth in the American economy as well as business creation, but they need to be aware of the challenges associated with ignoring their business succession planning.
In a recent national study, veteran business owners indicated that they were more likely to say they were in the process of winding down their business than the general population. This could be due to the fact that the majority of veteran business owners tend to be older than individuals in the general population and therefore more likely to be thinking about retirement or other life changes that would encourage the close of a business. There are several important things you can do in this process.
- Start planning
- Identify your transition options
- Prepare for a comprehensive business evaluation
Going through each of these stages can be especially helpful for protecting your interests and ensuring that you are adequately prepared for moving on from your business.
When you have put a lot of energy, resources and time into building your small business from the ground up, you might like to imagine that you’ll continue running it for the rest of time. Deep down, however, you understand that this is unrealistic. This is why you need to consider business succession planning now. Whether you intend to pass the business on to a family member or to sell your company, you need a succession plan. This helps to contribute to the long-term business viability. It also increases the chances that you will have sufficient funds in retirement to support you as well as to continue the business that you have fought so hard to build. The longer that you wait to conduct your succession planning the harder it will be to take action. Here are the four most important steps for getting started.
- Involve your family. No matter what vision of the future you hold, you need to think about your relatives in terms of succession planning discussions. Are there any individuals already in place who may want to take over when you leave? You should also consider who is qualified to step in.
- Create an exit strategy in your business plan. More than likely you already have a business plan for the next couple of years. Your succession strategy and exit strategy should also be included in this plan.
- Put together your team of advisors. There will be several different people you need in the process of doing your business succession plan, such as an estate planning attorney, a business partner, succession planner, and an accountant. They can help guide you through the complex process of succession planning.
- Identify and prepare to train your successor. Once you are seriously contemplating what lies ahead for the future of your company, you will feel more inclined to help choose the right individual to take over after you leave. You need to carefully consider individuals who already have the qualities and begin to put in place a training program to prepare them for the future.
Many small business owners know the struggle of keeping track of multiple priorities working long hours and taking risks. However, even the most successful small business owners can be tempted to drag their feet when it comes to business succession planning. Some of the most common reasons for this process being skipped over are that succession planning is seen as emotionally difficult, time consuming, complex and expensive.
Without a business succession plan, however, you are facing a lot of risk if you do someday hope to have your company survive you or to sell it for a fair price. There is no cookie cutter process you should approach for business succession planning. The amount of time spent in this process depends on the size of the business and the particular issues involved such as whether or not family members will be taking it on. Do not wait too long to get started, however, because this could prove problematic if something happens to you and you need to exit the business suddenly, having a business succession plan in place can help to avoid the challenges with a sudden departure.
A business reflects its owner, and a clear plan can keep that concern on the path that was chosen. Lack of a succession plan could morph the business into something different or leave it in the hands of someone who would not reflect the founder’s intent or attitude.
The type of plan used will depend on whether the business is to be sold or kept until death or retirement. If the business to kept and passed along, use of an outside consultant can eliminate bias in the selection of a successor and that successor could be placed in a similar business to prepare for the future.
If the business is to be sold, there are many options; an outright sale, a buy-sell arrangement for a future date, a family limited partnership, or an annuity arrangement trading your business for a guaranteed lifetime income string.
Make sure you contact a New Jersey business succession planning attorney when you have questions about charting a successful path for your company. Planning ahead can prove to help answer some difficult questions.