Your family business is likely more than one thing. It could be a mainstay of your family throughout generations, a source of income and employment, a place of fulfillment for multiple family members and more.
As the owner of your California company, bar, restaurant, hotel or more, you may have some complicated estate planning considerations to sift through. When planning your estate, thinking of how to address your business can be difficult and largely depend on the makeup of your business. Here are three considerations for your family business:
Create a comprehensive succession plan
As a business owner, you likely have constant items to attend to. However, proactively creating a succession plan to address the transition after your retirement or death is key to the future of your business. Unfortunately, many business owners fail to address this with enough time to develop a plan that fully encompasses their needs.
Take the time to critically think about what you want for the future of your business. Depending on your business, this discussion may involve other family members or key individuals, as well. Ultimately, your plan should address who will assume control of the business, how the business will fare financially without you, and more.
Address key financial and tax considerations
When developing your succession plan, consider whether your estate will be subject to estate taxes upon your death. While California does not impose a state estate tax, the 40% federal estate tax presently applies to those with an estate valued at $11.4 million or greater. An estate attorney can identify strategies to minimize your tax burden, including by incorporating trusts into your estate plan.
Another key consideration is to address the distribution of shares. For businesses with multiple owners, drafting a buy-sell agreement can clarify the distribution of shares upon an owner’s leave, incapacity or death, thereby avoiding turbulence later on.
Communicate your plan to all involved
In any business, communicating a succession plan is essential to ensuring a smooth, informed transition. Those informed well in advance should include your successor, other executives or members of the management team, stakeholders and your family.
This process can begin as early as when you first start developing your succession plan. Rather than unveiling your plan to these key individuals mere weeks or months before you plan to transition out of the business, identify, inform and prepare both your successor and others ahead of time.