Estate Planning for the Pole Business Owner

Once you start your business, there are so many things to consider!

One of the last things we often consider is Business Succession Planning, part of Estate Planning. This is what happens to your business after you die.

Most people don’t want to think about this, especially when they are young, but it is essential to start planning now to ensure your desires regarding your business are met AND to provide for any family members or co-owners that might benefit from your business.

What happens to my business after I die?

Laws that impact your business will differ greatly depending on your country and/or state, the number of beneficiaries you have, and whether you have your business assets in a trust. A trust is a legal arrangement that can help protect the business assets. You need a lawyer to create a trust.

According to the American College of Trust and Estate Counsel, if there is no business succession plan in place, your assets will be split according to state law.

Some states will split assets 50/50 between a spouse and any children, other states will have a different distribution based on how many children you have.

If you live in the US, 17 states and the District of Columbia have either an estate tax, inheritance tax or both. A full list can be found at this link. At the bottom of that webpage there is a chart that shows you the estate tax exemption (estate value-estate tax exemption = estate taxable amount), the estate tax percentage and the inheritance rate percentage. Note the estate tax exemption only applies to the estate tax and not the inheritance tax.

In the US, if you have no dependents, your assets will go to your next closest relative (family tree style, not emotionally) who is still alive. If you have no living family, your assets become “escheated.” This means that the state claims them.

Putting your business assets in a trust will keep them from being split should you pass away unexpectedly. Plainly stating in a will who should get your business assets will ensure the right people have possession of your business.

Who will keep running my business?

Another thing to ask yourself, while you’re still alive, is “who should run your business after you pass?”

Your spouse/partner may not be the best choice for running your business. This is something you’ll have to consider when writing your will.

Perhaps you have a high-level employee who is a good choice for running your business, or a non-romantic business partner who is already doing a lot of the business tasks.

Conversely, maybe the main product you sell is you.

If your business is unsustainable without you (i.e., SW where people are paying for your time specifically, coaching where people come to you for your expertise, specialized physical therapy for pole dancers and you haven’t trained a younger therapist, etc.), your business may have to dissolve upon your passing.

These are all things you should discuss with the advisor helping with your estate planning.

What happens if you have co-owners?

If you have a co-owner who is not your significant other, in the US, you can create a “buy-sell agreement.”

A buy-sell agreement sets out rules and expectations about what will happen following any number of “triggering events” such as death, disability, insolvency, retirement, etc. It’s like a prenuptial agreement, but for your business assets.

A buy-sell agreement is not a replacement for a business succession plan, but it’s beneficial to have one in place as part of a business succession plan.

Where do I start?

Estate planning is an important part of business ownership even if it’s part of something we don’t often like to talk about.

Start by engaging appropriate estate planning lawyers in your jurisdiction to help you understand the best solution to your situation. In lieu of lawyers, make sure you at least have a will. Companies like Rocket Lawyers have templates that can get you started.

Communicate with all the people involved, like your family and any co-owners or high-level staff about your wishes and understand what their opinions are too.

You may want to consider creating a business continuity plan, getting life and/or disability insurance, or creating retirement accounts (our partner Ameriprise can help with that!)

Remember, estate and Inheritance laws differ from country to country and state to state. Thinking about this stuff now, hard though it may be, will make it easier on those who love you after you’re gone.