Small businesses are the backbone of our economy. According to data provided by the Small Business Administration (SBA), North Carolina is home to nearly 850,000 small businesses, and they employ nearly 46% of our state’s workers. As all small business owners know well, owning and operating a company is challenging, especially in the current economic climate.
With so much on your plate on a day-to-day basis, it can be easy to overlook the importance of estate planning. Every small business owner needs a comprehensive, well-structured estate plan. In this article, our Charlotte estate planning attorneys offer five tips that small business owners can use to help protect themselves, their families, and the future of their company.
Start With a Will, Power of Attorney, and Other Core Estate Planning DocumentsSmall business owners in North Carolina should have the same core estate planning documents as all other adults. The fundamental purpose of estate planning is to ensure that your family is protected, you are protected if you become incapacitated, and your property/assets are distributed to your selected beneficiaries after you pass away. The basic estate planning documents are as follows:
Depending on the nature and complexity of your estate, you may also want to use a wide range of other estate planning tools. For example, many small business owners can benefit from setting up a trust as an efficient and cost-effective way to protect and transfer assets/property.
Know the Importance of a Business Continuity Plan and Business Succession PlanFor small business owners, estate planning should also involve business succession planning and business continuity planning. A business succession plan helps to determine who will take over the ownership and management of a business should you become disabled or pass away. A business continuity plan provides immediate instructions to ensure that a company can continue to operate in an emergency situation, such as the sudden loss/departure of the business owner. If you have any questions about protecting your business as part of your estate plan, contact an experienced North Carolina business succession planning attorney for help.
Make Sure You Have Adequate Life and Disability InsuranceEveryone can benefit from obtaining life insurance and disability insurance that is sufficient to protect themselves and their family. For business owners, getting enough life/disability insurance coverage is especially important. Small business owners may want to consider purchasing a type of insurance referred to as a “key person policy.” In general, key person insurance names the business as the beneficiary and pays out compensation to help the company through the transition of the death/incapacity of a critically important partner/owner/manager.
Consider a Buy-Sell Agreement (Key for Small Businesses with Multiple Owners)Does your small business have multiple owners? If so, it is strongly recommended that you consider putting a buy-sell agreement in place. A buy-sell agreement is a legally enforceable contract that governs what will happen to each business partner’s shares of the company should they suddenly pass away. In most cases, buy-sell agreements give the other business partners a “right of first refusal”—meaning they will get an initial opportunity to buy the shares. Though, these agreements are complicated and should always be customized to suit the unique needs of the small business.
Update Your Estate Plan and Your Business Plan as NecessaryAn out of date estate plan can cause problems for anyone—especially a business owner. To ensure that maximum level of protection for themselves, their family, and their company, small business owners should regularly review and revise their estate plan as needed. As a starting point, you should update your estate plan after a major live event, such as:
For business owners, it is also a best practice to review and revise an estate plan whenever the company has undergone significant changes. As an example, imagine that your Charlotte small business significantly expanded operations a few months ago. It probably means it is the right to time review and review your business succession and/or business continuity plan.
Call Our North Carolina Estate Planning Lawyers TodayAt Arnold & Smith, PLLC, our North Carolina estate planning attorneys have extensive experience advising small business owners. We will put in the time and resources to help you devise the best plan for your needs and objectives. If you have any questions about estate planning as a small business owner, we are here to help. Contact us today for your fully confidential, no obligation initial legal consultation. With offices in Charlotte, Monroe, and Mooresville, we represent small business owners throughout North Carolina.