A lot might not go the way you intend if you own a business and don’t carefully plan your estate, a video by the American College of Trust and Estate Counsel cautions. There’s state law to consider as well as deciding who should be in charge when owners die or become disabled. As Trustandwill.com points out, succession planning involves creating a blueprint for the transition of a business to:
- future generations
- successor owners
The team at Geyer Law has been helping owners of new Indiana businesses start off on the right foot, preparing employment contracts and other business documents. For more mature businesses, though, the planning might center around:
- transferring shares to a family member
- transferring shares to an employee as part of an employment package
- selling a partial interest in the business
- selling the entire business
One very proactive step business owners might take is creating an ESOP or employee stock ownership plan. ESOPs, like 401Ks, are tax-deferred retirement plans, except that in place of investment portfolios of stocks or bonds, the underlying investments are shares of the employer stock (which the owner “sells” to the plan). As employees “vest” in the plan over time, the owner is able to exit the business without the disruption of a takeover or merger.
For business owners who want to keep their business going, taking care of both employees and family members, all while potentially reducing both estate and income taxes, an ESOP plan can go a long way towards equipping employees for retirement and creating a legacy for the next generation.
Now, that’s the kind of estate planning that means business!
– by Rebecca W. Geyer