When starting a business, it’s easy to get lost in the details of planning, creating an growing your company. However, many entrepreneurs fail to consider the financial consequences of not creating an estate plan.
If you suffer serious illness or injury, or die suddenly, what would happen to the business you’ve worked so hard to build? What will happen to the loved ones who rely on your business income?
Estate plans are essential for all business owners. Without a clear estate plan, business assets and responsibilities will be redistributed according to statutory rules – not what you may have intended. Arguments and legal disputes may arise, creating great stress, frustration and legal fees for your loved ones.
Avoid financial, emotional and legal problems with an estate plan. You will need to:
- Write a Will
Without a Will, major disputes can arise about entitlements to money, assets or businesses. Your Will should name an executor who will manage your deceased estate. The Will should also include information about your business, and who will take over your business or shares.
- Create a succession plan
If you want your business to survive you, you will need a succession plan. This plan identifies who will take control of your business, how it will be transferred, and how it will be managed. You should also make a plan if you wish to sell or close the business after you die.
- Give someone else legal authority
It is also important that you give another person authority to sign for the business’ bank accounts. Obtaining an authority after your death could be time-consuming, and may interfere with business’ capacity to pay bills, wages and other expenses.
- Draft a buy-sell agreement
If you co-own the business (or have a part-share), you should draft a buy-sell agreement between partners. This contract details what should happen to a business partner’s share if they die or are otherwise incapacitated. This agreement may provide guidance on the value of a partner’s share, and who has first option to purchase that share.
You must consider what will happen to your business and assets, should the unthinkable occur.
With a clear Will, a detailed succession plan, a signing authority and a buy-sell agreement, you and your loved ones will be properly prepared for the future.
If you need assistance preparing your estate plan, contact Martin Bullock Lawyers on (02) 9687 9322.