Most family business owners focus on the business’s day-to-day activities and forget to plan for the future. However, it’s crucial that you keep both details in mind to ensure your business continues running even in your absence.
While setting up a limited liability company (LLC) may provide you with some personal protection, it does not protect your business assets. Therefore, you may need to create a trust to protect your family business. Below are a few ways a trust can benefit you.
1. Minimize taxes
Your business represents the bulk of your family’s wealth. However, transferring ownership from generation to generation free from tax implications can make the difference between keeping the business in the family and selling it.
If you want to prevent a situation where your loved ones have to sell the business, transfer assets to a trust. Because these assets will no longer be considered part of your estate, they will not be subject to estate taxes after your death.
2. Can be tied together with your business succession plans
You obviously want the legacy of your business to continue and for the right person to take over leadership once you’re gone. However, while you can use a trust to help manage your assets for the benefit of your family, a traditional trust has some limitations when it comes to family businesses.
If you want your family business to remain within the family and continue for many generations, ensure that you include explicit instructions within the trust on how the business should be managed and by whom. You should also indicate how business interests are distributed to your heirs.
If you’re a family business owner, you owe it to yourself and your loved ones to ensure there are plans for a smooth transfer and continued management of the business upon your death. Unfortunately, creating a trust that helps you accomplish all your goals can be a complex process, which is why you should consider seeking legal guidance.