Some wills and trusts include instructions for a named heir to take over a business after its owner dies. Unless an individual dies intestate, Illinois law does not require family ventures to pass on to a surviving spouse and children.
When owners prefer to have their business sold, they may leave instructions for a sale and leave the proceeds to their heirs. As noted by Franchise.com, if adult children do not have an interest in a business or the capabilities of managing it, a proprietor may specify selling the enterprise in his or her estate plans.
Successor heirs may jeopardize a business’s longevity
When heirs who have inherited a business do not work well together, it may affect the company’s longevity, revenue streams and reputation. Selling the business, however, may avoid issues that could jeopardize an enterprise’s employees, customers and long-term relationships.
Ownership dilution may affect the future value
Inherited business shares or units may dilute ownership value for existing shareholders, partners or employees. Without effective succession planning, a sudden increase of new and inexperienced owners may create animosity between heirs and seasoned managers. A sale, however, may avoid conflicts in running a business and distributing its profits.
Preparations to attract a business buyer
A business transaction requires careful planning to attract a suitable buyer and obtain a desirable selling price. Arranging for a professional appraisal generally provides realistic figures regarding the company’s financial matters and fair market value.
As noted by Ceoworld.biz, effective planning before a sale may help attract a suitable successor. Doing so may offer a current owner an opportunity to continue working while training a prospective new owner to manage the business. Transferring ownership of an enterprise while alive may also reduce the tax liability that the current owner’s heirs may incur.