Farmers, ranchers and other small business owners in Oklahoma may know that it is important to think about what will happen to their business after they have passed on. Some may have even developed an estate plan addressing this issue. However, one should understand that in some ways, business transition and estate planning are very different.
In general, business transition is the means in which a person’s business is passed on from the existing owner to a new owner. One distinction between business transfers and estate plans is that business transfers usually occur during the business owner’s lifetime, while an estate plan takes effect after the business owner passes away. In some cases, the business transition process is completed relatively quickly. However, it is not unknown for the process to take a long time, based on how much the business is worth. In addition, business transition is not always a one-step process. It may take several steps or phases, based on the current business owner’s preferences.
Estate planning, on the other hand, addresses how a person’s finances will be passed on after their death. Through an estate plan, a person’s assets can be transferred to an individual, or even to a trust or another business entity. Unlike a business transition plan, an estate plan can address the transfer of both business assets and personal assets. Even if a business owner may not believe they have much wealth, it is still important to create an estate plan.
As this shows, while estate planning and business transfers have some commonalities, in some situations it may be sensible to address both individually. Having both an estate plan and a plan that address the transfer of one’s business during one’s lifetime may benefit some Oklahoma business owners.
Source: columbustelegram.com, “Estate planning and business transition quite different,” Allan Vyhnalek, July 19, 2015