It took you 20 years to build your company. You started with nothing but a dream, and now the company is valued at $1 million. You've put in so much of your own time, money and effort, really giving everything you have to the company. You're proud of it.
And you don't want to lose it. Even if you pass away, you don't want your company to be crushed by a lack of planning. You don't want to see that $1M valuation drop right back to where you started: at zero. You must consider your company when doing estate planning. Below are five reasons why:
You don't want the company to die with you. You want it to pass on to the next generation and provide them with the income and lifestyle you've always dreamed of for them. Planning in advance helps make this transition seamless and ensures that your company changes hands the way you want it to.
Maybe you don't own the company by yourself. With estate planning, you can utilize a buy-sell option. Essentially, you can guarantee that your ownership percentage goes to the other owner, not to a third party, so the company carries on without interference.
You need an estate plan that limits the tax burden on your heirs as much as possible. This can be especially helpful if you expect the company to keep growing and increasing in value, even after you're gone.
4. You can set up income for yourself
Estate planning doesn't just mean planning for death. You also want to plan for sickness and disease that could incapacitate you or at least make it impossible to work. Along with everything else - like deciding who has the power to make medical decisions for you - you can set up the company to provide income for you and your family when you need it most.
Maybe you want to keep the company in the family. It's critical that you detail how this is to be done. Does it go to your spouse? Does it go on to all of your children, splitting ownership equally? Do you want to leave it to the one child you think can actually run it? If so, do the other children get a cut of the profits, but no decision-making power, or are they cut out entirely?
These are all critical questions to ask. Every situation is different. The worst thing you can do for your company, though, is to fail to put that plan in place. You've put so much into the business over the last two decades. Take the time to plan for the company when you're no longer around to run it.