While estate planning is crucial for anyone, it is especially important for small business owners given that much of their wealth is often entangled with the business they’ve built. While this business may have been their while they pride and joy were alive, not all businesses become multigenerational family legacies. If your business is particularly reliant on you or your expertise, you need to decide now what you want to happen to your business upon your retirement or death.
It’s vital that you create a succession plan for your business—whatever this looks like for you. You could groom a relative to inherit the family business. You could strategically build the company for an eventual sale. Or, you could implement a plan to terminate the business upon your retirement.
In an owner-dependent business like a solo medical practice or independent contractor business, the owner’s goal is to usually to earn the highest income and retirement savings contributions possible each year. Leaving a legacy can be less of a priority than in other types of businesses.
Steps to take to secure your estate
As the owner of an owner-dependent business, you’ll want to plan for any potential liability issues that could arise in connection with the business following your death. This includes acquiring excellent liability insurance and drafting contracts that protect your estate.
It is also advisable to document your intentions to close the business upon your retirement or death, if that is what you choose to do. If you don’t and you die unexpectedly, it’s possible your assets could be subjected to estate taxes.