Have you ever wondered what would happen to your family when you die? Of course, you did. But picture this: you’re the owner of a large-scale business and you are happy thinking you’ve got a whole estate to provide for your family even after you pass. But is leaving everything to your family the solution for their financial security? No. That is not the entire reality.
A simple oversight can leave your family, including your pet, and your business stranded when you pass. Indian laws around death and business can sometimes surprise you. So, we’re here to give you a wake-up call that when it comes to planning for the unforeseen, writing a Will is the best-advised option.
A Will talks your language when you’d be no more to clarify, defend, or resolve your choices yourself. Read this article to know more about the step you should take to plan a secure future for your business after you pass.
Preserve Your Rewards of Today for Tomorrow
Synonymous with death planning, estate planning only means making considerations in your business and life plans to provide for and secure the future of your loved ones. So, if you’re a business owner, have you ever considered business survival?
It’s quite natural to expect the most benefit for your family from your business, it being the largest of your assets. However, it’s ironic how your business is the active income source only when you’re alive. That is when you haven’t considered business survival and didn’t make proper plans.
If you want the most benefits out of your business, your largest asset, you got to plan it wisely and have a proper succession plan in place. With an estate plan, you can rest assured that your business will be taken care of by the right people after you pass and your family will continue earning from it.
What really happens to your business when you die?
Although all businesses can differ, the common factor lies: a person is in charge of the entire business. So, what happens when the in-charge passes away? Let’s understand it better:
- Sole proprietorship: Such businesses cease to operate when the owner dies. All the company’s assets become part of the owner’s estate and will be distributed according to the owner’s Will.
- Partnership: In the case of formal partnership agreements, the deceased partner’s shares transfer to the rest of the partners and their heirs. And in the case of an informal partnership agreement, the business legally ends along with the partnership at the death of one of the partners.
- Limited Liability Corporation (LLC): In terms of an LLC, there’s always a well-defined plan that accounts for the next steps if and when the owner dies. The plan addresses the concerns as to what happens to the business, its shareholders and its managers.
How can you include your business in your Will?
The best way to save your business and your rights over it is to plan well, write a Will and include your business in your Will. Writing a Will allows you to add, change, or remove assets in your Will. Therefore, in the section that says ‘Accounts and property,’ ensure to choose ‘Business that I own’ to add the name of your business to the Will.
Here’s a short to-do list to plan for the next steps of your business after you pass away:
Prepare the proper estate documents
A Will or trust lets you add your assets to your Will and the plans for every asset of yours once you pass away. You can mention the beneficiaries of the Will, i.e., to whom, which and by what amount do you want your assets to be passed according to your wishes.
Additionally, you can also mention the name of the person you want to take over or manage your business in the Will. However, with proper funds left for a trust, it makes the probate process easier for your family members, comparatively less expensive, and less time-consuming. So, it’s always wise to include your business in your Will or leave it to a trust.
Purchase additional insurance
No matter the nature of your ownership of your business, make sure to purchase an additional life insurance and disability policy in your spouse’s and children’s names. This way, you’ll help your family avoid any probable financial hardship when the business goes through a buy-sell agreement process.
Consult an estate planning attorney
Even while you were still in college, you always heard about ‘smart preparation.’ Life and career work the same. Plan your business appropriately with the help of a legal estate planning attorney. An experienced attorney walks you through your options and helps you come up with the best plan for your business.
Why is this important?
What happens to your business after you depends on the nature of your business and how well you planned it. With this article, we hope you already know deep down that writing a Will helps your family and your business face the unforeseen future well-prepared.
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