What Planning is Specific to Business Owners?

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KS and MO Attorney Kyle E Krull

Written by Kyle Krull

Attorney & Counsellor at Law Kyle Krull is president of the Law Offices of Kyle E. Krull, P.A., an Estate Planning Law Firm located in Overland Park, KS. Estate Planning Attorney Kyle Krull has provided continuing education instruction to attorneys, accountants, and financial professionals at local, state, and national programs.

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POSTED ON: January 14, 2022

Business owners should tie estate planning to succession planning. Owning and running a business is no small feat. If it were, more people would have their own businesses. Those who start a business must address all aspects including mission, finances, and staffing. According to a recent Index Fund Advisors article titled “How to Avoid a […]

Business owners should tie estate planning to succession planning.

Owning and running a business is no small feat.

If it were, more people would have their own businesses.

Those who start a business must address all aspects including mission, finances, and staffing.

According to a recent Index Fund Advisors article titled “How to Avoid a Messy Succession Battle,” business owners should also begin with their end in mind.

Business owners could lose everything without proper planning.

Business owners are responsible for protecting their loved ones, customers, and employees.

Because they will not be alive forever, the fate of their companies, employees, let alone their loved ones, depend on them.

Succession planning should be discussed at the infancy of the business and periodically throughout the lifetime of the owner.

The owner should identify individuals who are both skilled and responsible enough to run a business, in addition to being reliable and competent employees.

In many instances, it is best to select multiple individuals for leadership positions.

This way you can highlight personal strengths.

Someone can be in charge of the details of running the business while another plans for long-term development.

What if you started the business with one or more other people?

You will not be able to make all the decisions on your own.

Instead, you should work together to create a succession plan.

This should include procedures and guidelines for hiring relatives or friends for important positions.

The business owners should also address how to shield the company from the possible divorce, personal bankruptcy, or disability of one of the owners.

A common tool for companies with multiple owners is a buy-sell agreement.

This document provides details for how the company can be reorganized in the future and who receives what.

You should also include rules in your succession plan for transferring shares and equity to family members.

This allows you to outline exactly who can have stock in the business, how much is allowed, and whether voting rights are included.

Specifying the financial terms of a sudden exit or upon the death of the owner is also essential.

Because business owners find much of their financial wealth tied to their companies, they must simultaneously execute estate planning in conjunction with their business succession planning.

This is important for keeping the business running and for providing financially for loved ones.

The stakes are high when it comes to both of these areas.

Business owners should begin their business succession planning and estate planning now with the help of an experienced estate planning attorney.

Do not delay,  if you have not yet done so.

If you have, then review and update your documents periodically.

Reference: Index Fund Advisors (Nov. 22, 2021) “How to Avoid a Messy Succession Battle”

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