Estate planning is essential for almost everyone, but it’s especially important if you own a business. Your company may account for the majority of what you leave to your heirs. And while you may be years away from retirement, it’s far better to get started sooner rather than later. Consider these factors that you may need to address in your estate plan:

1. Succession plan. This can have a ripple effect on other aspects of your estate planning. Do you plan to sell the business to an outsider, or perhaps to hand the reins to a member of your family? If you’re grooming a family member for the top spot, it’s a good idea to make that clear to everyone involved. Similarly, if power within the company is to be shared among several family members, spell out how that will work. Establish how much control you may want to keep, and make sure you document the arrangement so there won’t be misunderstandings.

2. Buy-sell agreement. A buy-sell agreement may work hand in hand with a succession plan. A buy-sell agreement is a contract between a company’s co-owners or shareholders specifying what will happen if a principal dies or is disabled. The main benefit is that such an agreement establishes a value for the business, which may be helpful for various purposes—for example, if someone wants to buy or sell shares from or to another co-owner.

3. Estate taxes. The specter of potential tax consequences often lurks in the background for small businesses. Even with the generous federal estate tax exemption ($5.49 million in 2017), your heirs may face tax complications, especially on the state level. Because most businesses have a minimum of cash on hand to pay estate taxes, the company might have to be sold to satisfy federal or state obligations. Estate tax returns are generally due within nine months of death, so make provisions now to avoid a distress sale in the future. And find out what tax breaks could benefit the estate—for instance, a federal tax law provision that allows deferral of estate tax payments when a business interest comprises at least 35% of a taxable estate.

4. Life insurance. One way to avoid a forced sale of a business is to secure adequate life insurance protection for the owner or co-owners. Proceeds from a life insurance policy can be used to pay estate taxes, debts, or other business obligations when an owner dies. Life insurance also may be an essential part of a buy-sell agreement. Depending on your needs, you might choose a form of whole life insurance, term insurance, or another variation.

To avoid problems down the line, consider all of the estate planning implications of owning your business. We will be glad to assist you with the specifics based on your personal circumstances.