inheritance tax on paper

You’ve seen it in movies, and probably have heard of it in real life, but inheriting a small business from your family or even a close friend is entirely possible. Inheriting a business may sound exciting, but for some, especially those who aren’t savvy with entrepreneurship or the industry the small business is in, it can be quite daunting. As such, we’ll be guiding you on the simple steps you can take to help you figure out which steps to consider if you ever end up inheriting a small business:

Make Sure It’s Official, And Make it Official

Before you even decide to do anything, make sure to go over all the legal paperwork and see if you do own the business handed down to you, or if it’s split with other relatives and persons. It’s a lot easier if you’re named as the sole heir, but if you’re sharing the business, it’s important that one of you formalizes the structure and your roles in the business. Specifically, there should be a signed and agreed-upon document detailing the roles of everyone involved in the business, the sharing, how it’s operated, who operates it, and even exit plans if ever they chose not to be involved in the business. This is to ensure that you avoid any squabbles and disputes, as well as to prevent having a ‘too many cooks in the kitchen’ situation.

Review the Documents and the Business Plan

It’s important that you’re fully acquainted with the business, inside and out. From the suppliers, to the current funding, to the staff, and the tax situation. So do your research and make sure that all documents are in order. You may also want to review the current business plan and how things are operated to see what can be improved.

woman talking to a business professional

Talk to The Pros

If you’re the sole heir (or the one that the shareholders have decided to manage the business) but you’re not that confident with your entrepreneurial skills or aren’t that familiar with the specific industry or business you’re going to run, it’s best to talk to people who are skilled and know the industry. They can be people from your family, or could also be outside advisors. The bottom line is that you should get all the expert help you can get, especially if you’re starting out as a beginner. This may even include hiring a lawyer to ensure that everything in the business is legal. You may also want to hire a local firm that offers small business accounting services such as bank reconciliations, income statements, and all tax concerns and processing to straighten out the finances of your business in Taylorsville.

The Other Option: Selling It

There’s always the option to sell the business; if you’re the sole heir, it would be easy to do so, but if you’re among a group of shareholders, you’ll need a unanimous decision from other shareholders in order to sell it — which would be easy if no one wants to handle the business for whichever reason. However, this is a decision you shouldn’t be taking lightly, and it’s important to balance out the pros and cons of selling it, as well as properly forecasting if it’s more profitable to sell it than running it.

Conclusion

Inheriting a business can be a curse or a gift; if handled poorly, it can end up with family squabbles or with you frantically running the business into the ground, or it could also become a huge opportunity to build family relationships and have a business grow to become more sustainable and profitable. This is why you should be extra careful and take the necessary steps listed above to reduce the risk of failure and increase your chances of success.