3 New Years Resolutions for the Small Business Owner
Category: Business Law and Planning,
I am always in favor of lawyers who can speak English instead of Legalease - here is a 1-2-3 New Years Resolutions for Small Business owners, courtesy of Jean D. Sifleet, Esq. I added some emphasis here and there for some points to really take to heart.
You’ve heard it all before, but year-end is a great time to reflect on your accomplishments and plan for the future. This year, try the 1-2-3 approach.
Succession, retirement and estate planning are closely linked for the small business owner. If a small business owner dies without a succession and estate plan, chaos occurs in the business and for the family. If the small business owner does not have a retirement plan, financial security for the later years of life is uncertain and remains tied to the business.
Doing nothing can have extremely severe and unintended consequences. There are many sad horror stories of family fights and legal battles about how the estate of a small business owner will be divided up by the survivors. Businesses have been forced to sell property to pay taxes owed or close as a result. Many of these problems can be avoided.
As you pull together your year-end financial results, it’s a good time to make your plans for the future. Recent changes in the law make it easier to put more money away for retirement in a tax advantageous manner. This is the time to think about reducing your taxes by funding your retirement plan.
Try the 1-2-3 approach to New Year’s Resolutions.
Resolution (1): Take action.
Taking action before a crisis arises is much better than reacting under stressful circumstances. If your will and estate planning documents were prepared years ago when the kids were little, as is frequently the case, they need to be reviewed and updated. If the small business owner’s will or trust says, “equal shares to my children,” there can be a disaster in the making. Similarly, if you have put retirement and benefit plans in place over the years, it is important to review them from time to time.
Resolution (2): Articulate your long-term goals.
Planning for your succession, retirement, death is never easy. Your goals should drive the planning process. Hence, articulating your long-term goals is a critical step in the planning process. Answering the following questions will help to articulate your goals and establish a framework for planning.
– Do you plan to retire? At what age?
– Do you plan to transfer ownership and/or management within the family?
– Do you plan to transfer ownership and/or management to employees?
– Do you plan to sell the business?
The succession plan is a critical element of estate planning. A succession plan provides for the orderly transition of ownership and management of your company. Basically, the plan becomes a contract amongst the parties. Family members who are active in the business should be treated differently from family members who are not participating in the business. There are ways to equalize the relative shares that each of the children receives, while avoiding the potential for a power struggle in the business.
Resolution (3): Develop a written plan.
It’s critical that the plan be in writing because people have selective memories and memory fades with time. The importance of communication … and more communication amongst family members and key players … cannot be overstated. The plan can be reviewed, discussed, and revised over a period of time.
To avoid problems down the road, succession, retirement and estate planning should be done with professional assistance. Do not just sign over property or give away stock. A proper estate plan is truly a kindness to your survivors. Having a professional review of your plans gives you a clear understanding of what revenue stream you are likely to have in retirement and how your affairs will be handled if you die or become disabled.
Planning ahead is the best way to achieve your goals. Doing nothing can have severe and unintended consequences. So this year, try the 1-2-3 approach. It’s the best gift you can give your family. Best wishes for the New Year!
Labels: Business Law and Planning