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Business Law

Why would I need an estate plan after starting a business?

Delaware is home to more than 1.6 million businesses of all sizes and types. The Delaware Division of Corporations’ website notes that entrepreneurs formed nearly 250,000 business entities in Delaware during 2020.

As noted by SmartAsset.com, how you structure your new business affects how your assets pass on to your heirs, a partner or your spouse. If, for example, you operate as a sole proprietor, your business typically passes on to your spouse or heirs. Without an effective estate plan, your business could dissolve upon your unexpected death.

An estate plan helps protect an owner’s business

To protect a new or growing enterprise, you may choose to draft legal documents containing business management instructions. If you become ill or incapacitated, however, your spouse or your heirs may suddenly find themselves tasked with running your business.

Without the needed business skills, your heirs could lose the income normally generated through your enterprise. With a living trust, however, you could appoint a trustee to handle your business affairs. A qualified and experienced individual could then manage your business while you recover from an illness or injury.

Health care documents protect business owners’ medical preferences

An estate plan may also include an advance health care directive. This document specifies which type of medical care you prefer to receive. You may include instructions for treating an illness and for end-of-life health care decisions. With a medical power of attorney, you could name an individual to communicate your health care wishes.

Estate plans may include documents that address your asset management, business succession and health care choices. Whether you wish to pass your business assets on to heirs or have them sold, a chosen individual could assist with your affairs after you die or if you become ill. Effective estate planning could also help reduce the burden on your loved ones.

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