Your business is one of the most important parts of your life, and likely one of your greatest achievements. Naturally, you want to have it left in good hands after you’ve passed away. If you want your child or grandchild to inherit the company, there is a certain process you’ll need to follow to ensure that ownership is properly transferred.
Some people list a beneficiary as the inheritor of their business in their will, but this can be troublesome for several reasons. For starters, unless that family member has agreed to take over the operation, they may wind up becoming responsible for a company they don’t want to run. There’s also the risk that the transfer of the property and all its related accounts were not handled properly, which can result in major conflicts, unpaid expenses and profit loss. Planning ahead long before you intend to hand off your business is the best way to protect your estate and all that you’ve worked for.
End-of-Life Planning and Business Ownership
It’s vital that you decide who is going to handle your company’s affairs before you’re too sick to make your own decisions. This is done by planning long ahead of time while you’re still in good health and able to express your wishes. You can review a guide with an end-of-life planning checklist to start getting your affairs in order before they’re ever a concern for your loved ones. When it comes to the title of your company, you’ll have to look into transferring shares or interest percentages to appropriate parties. Business succession to a second or third generation you must make sure that your heir is not only prepared but that all financial, legal and tax obligations are in order as well.
Talk to Your Inheritor
It’s vital that you explicitly ask your child or grandchild whether they want to run the company after you retire or pass away. There are many times when owners are certain their loved ones want to carry on the business, but their child has no interest in taking over. This leads to an extreme conflict and possibly even a loss as the company has to be sold for less than it is worth to alleviate financial burden that results from a lack of management.
Make sure that you consider the personality of the person you want to pass your business on to. Even if they’re not a direct relative, you should choose someone who not only has an interest and passion for running the company but also has the skills and know-how. Are they willing to learn from you, and are you fully confident that they’ll be able to carry your business on after you’re no longer around?
Above all else, make sure you do not leave the decision of what to do with your company to someone else. It is not your beneficiaries’ responsibility to decide who gets what percentage of the business or what happens to it after you pass away. Instead, plan ahead now so that you are able to enjoy retirement and eventually leave a legacy for your loved ones that they’re proud of.
