How is estate planning different for business owners?

The concerns of business owners are in some aspects similar to those of non-business owners. They want to provide for their spouses and children. They want to prepare wills and incapacity documents to make sure they have proper representation in the future.

But threre are differences as well. In addition to planning for himself, her spouse and her family, a business owner also has to look after the future of a business consisting of people, assets and liabilities. Estate planning is more complicated for business owners.

A non-business owner can choose a retirement date then save and invest towards that day. When it arrives, he takes the gold watch and walks away. The future of the employer isn't really his concern. A business owner can't do that. The business owner has to figure out whether the employer/company is going to continue on after he leaves, and if so, who is going to run it and how are they going to be able to purchase the company?

Often the decision of who is going to run the company has a direct impact on the business owner's finances. If he is being bought out over time by a family member or a management team, he risks his retirement finances if the new owner of the business isn't able to run it successfully.

A business owner also tends to have one asset (the business) that makes up a large proportion of his estate. While the business owner may have a house, cabin and investments, the value of those assets combined are usually less than the value of the business. Where a non-business owner can simply leave his estate equally among his children, the business owner usually cannot. If the business goes to one of the children, the business owner has to figure out what the other children will get. That decision hinges on whether the child who gets the business buys it or inherits it, which again, is an issue the business owner has to decide ahead of time.

A business owner has to co-ordinate his business and personal planning to ensure that everything works together. A financial plan for a non-business owner is generally much simpler than a financial plan for a business owner due to the fact that the purchase, running and exit of the business are so closely tied with personal assets and lifestyle. For example, a business owner must ensure that if he is grooming one of his children to be his successor in the business that he doesn't have a will that leaves the shares of the company among all of the children.

Business owners often choose to have two Enduring Powers of Attorney - one for business assets and one for personal assets, whereas a non-business owner will almost always have only one.
Estate planning for a business owner almost always includes (in addition to the estate planning lawyer) an accountant, and may also include a banker, tax advisor, corporate lawyer or business broker.