WITHOUT A BUSINESS “WILL,” IT WON’T
May 29, 2019
Douglas Fitzhugh owns a sportswear manufacturing company, Fitz to a Tee, located in Ft. Worth, TX . After putting years of time and hard work into his company, Fitzhugh has been fortunate to see his business grow and thrive into a successful, productive venture. Now, he is concerned that his business will continue to thrive after he is gone.
If you, like Fitzhugh, have built up a successful business, take the time now to create a business will.
What is a Business Will?
A business will (also known as a succession plan) is a comprehensive estate planning tool that can include everything from shareholder buy-sell agreements to management plans and any other documentation relevant to the smooth operation and succession of your business. Whereas traditional estate plans are, in most instances, designed with tax minimization in mind, the business will may include such considerations, but is aimed primarily at maintaining the overall health of your business.
Protection for Family Members and Executors
Proprietorships and partnerships must cease operation as such, upon the death of an owner or partner. If a family member or executor attempts to carry on your business without the proper authority that can be granted through a will (succession plan), he or she can be held personally liable for all debts—and any decline in value of the business—while your heirs are entitled to all profits of the business.
The business will can clearly state the future financial options of your business: Who has the authority to continue its operation? Will it be sold, liquidated, or continued? Who are potential buyers and do they have the cash to enact the purchase in a timely fashion?
For sole proprietors, the business ends and the business assets and liabilities become the assets and liabilities of the estate. If a sole proprietor does not want to change the form of business ownership, but does want to retain the business, the planning concerns involving the administration of the business during the estate settlement period, and the continuation of the business after the estate has been settled, need to be addressed. The proprietor’s will must give the executor certain powers during the period of estate administration such as:
1) the power to retain the business interest indefinitely;
2) the power to do everything possible to operate the business successfully;
3) the power to re-organize the business, incorporate it, or merge it with another business; and
4) the power to borrow money, if necessary, to help the estate meet its need for liquidity.
The Status of Your Spouse and Employees
In all cases, your spouse should be informed of decisions regarding the disposition of your business. In the case of employees, specific details and confidential information need not be disclosed; but the fact that arrangements have been made to safeguard their welfare can be communicated through a meeting or memo.
How to Begin
As his first step, Douglas Fitzhugh secured an estate planning team consisting of his lawyer, accountant, and financial professional. Once you gather your estate planning team, they can help you devise a business will, including all the necessary information and required documents.
By following the appropriate, established methods for this transition, you will leave both your business and any successor management free from any unnecessary strife and help your business to live on.
Ready to start planning? Contact us at 614-389-9711 to schedule a consult.