Business owners must ensure their loved ones are cared for if something happens to them. They also have to balance the needs of their business with their personal wishes. This is where a business trust may come into the picture.
A business owner who establishes a business trust sets terms for how the business will be run, how the company’s profits are distributed and what happens when the owner dies or becomes incapacitated. These terms go into effect once the owner transfers the business into the control of the trust. Establishing a business trust has several benefits. As such, business owners should consider these to determine if a business trust is right for them.
Succession planning
The trust offers the business owner to specify who will manage and control the business after they can no longer do so. Once the trust is established, this is done without the need for probate or other court interventions. It can ensure a smooth transition and continued business operation to maintain the business’ value and stability.
Control and flexibility
The business trust can be set to specific instructions for how to control the company. The owner has a high degree of control over setting these terms. This provides them flexibility to determine what’s best for the company and set the terms accordingly. It can also set the succession plan for the company, which may include family members if they have an interest in taking over the company or someone else if the heirs aren’t interested.
Tax benefits
Business trusts can also provide tax advantages. Because the company isn’t in the business owner’s personal estate, there are significant tax benefits. This includes a reduction in the estate taxes. The trust can also strategically distribute income, which can lower the tax bracket for the beneficiaries.
Setting up a business trust is an important part of a comprehensive estate plan for business owners. Ensuring that every term in the trust benefits the business is critical. Working with a legal representative who can assist with one’s entire estate plan can help to make the process less stressful and more effective overall.