Small businesses make up the backbone of the United States economy. The U.S. boasts 28 million small businesses. Compared to the 18,500 large companies headquartered in the U.S., the amount of small companies is proportionately quite large.
Furthermore, of the 28 million small businesses, many operate without any employees except the owner. And a study conducted by Forbes recently found that based on a survey of 513 small business owners, 30 percent did not have an up-to-date estate plan detailing the future of their business, should the circumstances require discussion about such a topic. To be sure, estate planning is essential for small business owners, as this is one of the best ways to protect the interests of their business operations throughout the future.
Why Do Small Business Owners Avoid Having an Estate Plan?
When asked, small business owners have a variety of reasons for not having an estate plan. The survey defined having an estate plan as at least having a will in place. Some small business owners stated that they did have an estate plan because they did not want to face the concept of death. Others found estate planning to be overly complicated and stress-inducing. In addition, 30 percent of those without estate plans stated that they didn’t need one.
Do Small Business Owners Need an Estate Plan?
Yes. When a small business owner dies with no estate plan in place, the undetermined future of the business can lead to significant confusion among the survivors. This type of confusion often arises when one individual owns the company and has no employees. Many times surviving loved ones do not have access to the business’ bank accounts or the authority to write checks to pay outstanding liabilities, or do not know the passwords to log in to relevant business accounts.
In addition to the practical details of handling business after the owner’s death, there are tax benefits to be gained through small business estate planning. With a little time and planning, small business owners can create an estate plan that will help them enjoy the most tax benefits available and assist in a smooth transfer of their small business to the beneficiary.
Should Business Owners Update Their Estate Plans?
Yes, especially if the documents are over two years old. In the Forbes study mentioned above, only 12 percent of the business owners had an estate plan written within two years of the survey.
Tax laws change often, and if your estate plan does not address these changes, you may not be maximizing your wealth by avoiding all possible tax liability. Life changes may also happen that your older estate planning documents may not address. For example, divorce, the birth of children or grandchildren or the death of someone in the family might affect your estate planning.
Our Attorneys Can Help
Do you own a small business? Are you unsure about what would happen to your small business assets upon your death? Don’t hesitate to contact the dedicated attorneys at the office of Howard, Stallings, From, Atkins, Angell & Davis, P.A., for help.