If you are a business owner on main street or where two gravel roads cross between soybean fields, then you must take extra care when it is time to "transition" or "transfer" your business.
It takes more than "estate planning" to get it done, too.
This was the theme of a recent article in the Columbus (NE) Telegram’s appropriately titled “Estate planning and business transition quite different.”
Business "transition" is simply the transfer of a business asset or the entire entity from an existing owner who has decided to retire or move on.
This usually occurs during the life of the existing business owner.
Typical moving parts in every transition include:
- A valuation of the business and the resources; and
- The transfer of the tangible and intangible assets.
The transition can occur through the cash purchase of individual items, a purchase of share interest, and/or purchase of stock or certificates.
A cash sale, just like when buying a house, is the quickest and cleanest.
As you might expect, a larger company with stockholders and a corporate structure takes some time.
And lots of legal fees.
The lifetime transition of a business interest can occur whenever the owner decides.
In contrast, estate planning commonly involves the "transfer" of assets (personal and business-related)from one individual who had died to another individual who is yet living.
However, ownership of a business asset (tangible and intangible) can also be transferred at death to a legal entity, such as a corporation, limited liability company, or a trust.
Unlike the lifetime transition of a business, when the transfer takes place at the business owner's death it is usually part of an existing or implied estate plan or asset transfer process.
The original article notes a number of similarities between business estate transfer plans and business transition plans, but the big difference is the timing.
Neither is designed to be a replacement for the other.
A experienced estate planning attorney can help a business owner sort through these issues and help create both transition and transfer plans according to the owner’s unique wishes.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit my estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Columbus (NE) Telegram (July 20, 2015) “Estate planning and business transition quite different”