VIEWS: 9 PAGES: 1 CATEGORY: Legal POSTED ON: 6/30/2011
When you are in a small business partnership with others you must approach estate planning differently than those who don't have assets tied up in a business.
Estate Planning Strategy For Small Business Succession When you are in a small business partnership with others you must approach estate planning differently than those who don't have assets tied up in a business. In most cases, you can not simply bequeath your business share to your loved ones without putting them, and your partners, in a difficult situation. For one thing, you may not have anyone in the family who has the desire or the ability to take over your role in the business. And even if you did have a family member who wanted to assume your role, your partners may not be comfortable with them in that role. If your family was to sell the business, your partners would suddenly be forced to work with the buyer and this may not be to their liking either. Of course all these concerns would apply to you as well if your partner or partners predeceased you. The creation of a buy-sell agreement is one solution that is commonly implemented to address many small business succession cases. There are two such agreements that are most commonly utilized: the cross purchase plan and the entity plan. With the cross purchase plan the partners in the business take out life insurance policies on one another. Should one of them pass away, the combined insurance benefits are used to purchase the share that was held by the deceased from his or her estate. The details of this purchase are agreed upon by all parties when the agreement is originally drawn up. The entity plan involves the business itself purchasing life insurance on all of the co- owners. When one of them dies the proceeds from the policy are used to purchase that individual's share from his or her family. Buy-sell agreements are a tidy solution to a somewhat difficult situation. If you are a partner in a small business who is interested in devising an estate plan, the wise course of action would be to arrange for a consultation with an estate planning attorney who has a background in succession planning. Experienced estate planning attorneys Oklahoma City OK of the Parman and Easterday offers estate planning and business planning resources to residents of Oklahoma City OK. To learn more about these free resources, please visit www.parmanlaw.com/ today.
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