You Built the Business. What Happens to It When You’re Gone?

Building a business takes years of hard work. You may have invested your savings, grown a customer base, hired employees, and built something your family can benefit from for generations. But have you decided what happens to your business if you become incapacitated or pass away?

For business owners, estate planning involves more than deciding who receives the family home or bank accounts. Your business ownership should also have a place in your estate plan.

Whether you own an LLC, a professional practice, a family business, or shares in a corporation, planning ahead can help reduce uncertainty and give your family and business partners a clearer path forward.

Your Trust May Not Automatically Include Your Business

One of the most common misunderstandings about revocable living trusts is that once the trust is created, all of your assets are automatically included.

That is not necessarily the case.

If you want your ownership interest in a business to be held by your trust, the appropriate transfer generally needs to be completed. For example, an LLC interest may require an Assignment of Interest, while an interest in a corporation may require an Assignment of Shares or other appropriate documentation.

The goal is to transfer your ownership interest, not to transfer the entire business operation.

The company can generally continue operating under its existing name and structure. Employees, contracts, customers, and daily operations do not necessarily change simply because your ownership interest is held by your trust.

Instead, the trust becomes the owner of the interest, allowing it to be managed and distributed according to the terms of your estate plan.

What Does Your Business Agreement Say?

Before transferring any business interest, it is important to look at the documents that govern the company.

Your operating agreement, partnership agreement, shareholder agreement, or buy-sell agreement may have specific rules about transferring ownership. There may be restrictions on who can become an owner or requirements for obtaining approval from other owners.

For example, your business partners may have certain rights if you die or attempt to transfer your interest. Your agreement may also provide a specific process for determining the value of your interest or purchasing it from your estate.

This is why simply adding a business interest to an estate plan without reviewing the company's existing agreements can create problems.

Your estate plan and your business documents need to work together.

Who Will Take Over Your Business?

Estate planning for business owners also means thinking about the future of the company.

If you pass away, do you want your children to inherit your ownership interest? Should a business partner have the opportunity to purchase it? Do you want a particular person to take over management?

These decisions can become especially important when your family members are not involved in the business.

Without a clear plan, your loved ones may inherit an ownership interest without knowing how to manage the company. Business partners may also be left trying to determine how to move forward.

A succession plan can help address these questions before a crisis occurs.

Don't Forget About Incapacity

Estate planning is not only about what happens after death.

What happens if you become seriously ill or otherwise unable to manage your business?

A properly structured estate plan can address who may have authority to handle certain financial and business matters on your behalf. This can be particularly important for business owners whose absence could affect employees, customers, contracts, or the company's finances.

Planning for incapacity can help prevent your family or business partners from being left without direction when they need it most.

Protect the Business You Worked to Build

Your business may represent a significant portion of your wealth—and years of your life.

Estate planning can help you determine what should happen to that ownership interest, who should receive it, and how the transition should occur.

Don't wait until a death, illness, or family disagreement forces your business decisions to be made for you.

If you own a business, review your estate plan alongside your business agreements to make sure they reflect your current wishes and work together.

This article is for informational purposes only and does not constitute legal advice. Business succession and estate planning can involve complex legal and tax considerations. Speak with a qualified attorney about your specific circumstances.

For more information, contact our office at Askew & Associates, P.A. by calling 954-546-2699.

Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns.