After the death of a family member, most families are grieving and going through a difficult time. Discussing business matters is probably not one of the top things on anyone’s mind. However, it is important to understand what happens to an individual’s business after they pass and either leave it to someone else in the family or fail to include the business in their estate plan.
Failing to include a business in a business owner’s estate plan is a common mistake that can be costly. When that happens, the business entity and probate legal rules dictate what happens to the company after the business owner’s death.
This means the owner’s wishes will not necessarily be respected because they did not state what they wanted to happen to the business after they passed away.
INHERITING A BUSINESS
In cases where the business owner did a thorough job in their estate planning and chose to designate a beneficiary within the family to inherit the business, the situation can be much easier, although other complications may arise. For example, is there only one beneficiary or multiple? If there are multiple beneficiaries, what happens if they disagree with what to do with the business?
When the business has multiple owners, and they want to keep the business, the best thing to do is to work through any disagreements together, whether on their own or with the assistance of an attorney or mediator and from there, take charge of the company and ensure that any contracts that exist and are in place are honored.
RELATIONSHIPS WITH BUSINESS PARTNERS AND SHAREHOLDERS
In addition, it is critical to establish relationships with the individuals or businesses with which the previous owner had relationships. This will help the heirs manage the business and calm any concerns that business partners may have.
Generally, businesses and their owners dislike significant change, especially regarding change in management. After the business owner’s death and if they choose to pass the business on to family members, it is important to reassure the business owner that this change will not alter the relationship and that new management will do everything necessary to preserve a positive and profitable relationship between the parties.