If you own a business, you likely know the extensive planning that is involved in operations to ensure the organization is successful. Similar to the time and attention that is devoted to running a successful business, it should come as no surprise that a carefully devised estate plan is crucial to an orderly management of your personal affairs if something unexpected occurs.
There are several trusts available to individuals and business respectively. The organization of your entity and your long-term goals for the future of the business are important factors when determining the type of estate plan that is needed. Some common types of entities are:
- Limited Liability Company
- Sole Proprietorship
- General or Limited Partnership
An experienced business and estate planning attorney can make recommendations for the type of entity that is right for your business, as well as the estate plan that is right for you. The main goals when considering estate planning as a business owner are protection against taxes and an orderly transition of your business.
As we recently witnessed with the Tax Reform Act of 2018, tax laws are always subject to change. Establishing a proper estate planning vehicle, i.e. trust that compliments your business planning can provide a significant reduction in taxes imposed against your estate. In order to understand your tax obligations, you should obtain a current valuation of your organization. Proper evaluation of the tax burden can determine whether the business continues its normal operations in the event of sudden death.
Many business owners develop a succession plan when faced with the prospect of retirement. However, it is important to be prepared for the unexpected, including developing a plan of succession within your estate plan, such as a trustee who may be able to oversee the organization, and who will help keep the business running smoothly. Effective delivery of services or products, not to mention the employees of the business and the beneficiaries of your estate count on effective succession business planning.
Another aspect of succession planning is establishing a plan or agreement between business partners, which will be as a blueprint between family members of the deceased, and business partners, and establishes a sale price for the equity (shares) within a business. It can also include wording about whether or not you want your shares to be purchased and if certain individuals should not be involved with the company.
If you or someone you know has a business or is thinking about establishing a business, it is important to have the appropriate plans in place in the event the unexpected occurs. Contact our office to review your current business organization and the best estate plan for your needs.