I recently spoke to Austin Estate Planning Attorney Jim Norman about the need for estate planning amongst Austin’s start up community. Generally speaking, founders are slightly younger than the average estate planning client but Jim and I both agree that entrepreneurs need to plan for their incapacity or demise. When we spoke, we were strategizing about a new restaurant, which has similar risk to many of Austin’s startups. We broke the considerations into the lifecycle of the typical restaurant, which we simplified as the years of struggling, the years of popularity, and the years of tuckering-out.
During the years of struggling, companies and their founders should focus on more on the recipes for success and business planning. The Treaty Oak ELG can assist with many of those considerations. Although the typical company will not be profitable during the first years, establishing sets of best practices is imperative so that when things start to bustle, the founders can enjoy their income and success.
When a company gets to the years of popularity and flowing income, it is time to start using some of their discretionary funds on estate planning, according to Jim’s experience. It is important t take these steps in this phase of a company’s lifecycle for several reasons. Namely, planning is now affordable and estate planning should be done preventively. When Jim and I discussed this we both agreed that the preventative approach to estate planning during times of success is important both because death is inevitable and because courts have been known to set aside estate provisions when they appear to have been drafted in defense of a known business risk.
Companies with succession planning can transfer, close, divide, or make any number of changes through estate planning. Some of the pitfalls of not providing adequately for your business prior to the time of your incapacity are:
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Risking that personal assets will be used to cover business expenses;
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Contentious closure, transfer, or sale of your business in a manner that is harmful to your loved ones;
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Not establishing the revenue generation required to cover basic needs or college expenses; and
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The destruction of a legacy you worked hard to create.
Natalie Lynch collaborates well with local estate planning attorneys. If you would like to holistically provide for your family, your business, and yourself, give either of us a call to begin
