Small business owners often know the importance of planning to ensure success. If you own a business, hiring an estate planning lawyer who focuses on estate planning for business owners may prove essential to protecting your personal assets and business.
BrewerLong, founded in 2008 by law school friends Michael Long and Trevor Brewer, focuses on helping Florida business owners. Our team understands business owners’ unique estate planning concerns. We help our clients plan for the future. Reach out to learn more.
Estate Plans in General
Estate planning involves preparing paperwork and processes to transfer your assets after death.
Estate plans often involve a combination of:
- A will,
- One or more trusts,
- Life insurance and retirement account beneficiary designations,
- Powers of attorney, and
- Advance care directives.
For business owners, an estate plan must address not only personal assets but also the business’s future.
Estate Planning for Business Owners
Estate planning for business owners often involves creating or modifying governing documents, establishing trusts, defining ownership transfer terms, and planning for taxes. By addressing these issues as part of estate planning, you can deal with them before they arise.
The specifics of your estate plan depend on you as a business owner. Some business owners want their businesses to continue long after they are gone. Estate plans for those business owners often focus on ensuring that your business continues smoothly. Typically, that means weaving careful succession planning into your estate plan.
Other business owners may not want or expect their businesses to continue without their guidance. In that case, an estate plan may detail wrapping up and transfer processes to ensure the handling of all outstanding business transactions.
Succession Planning
A business succession plan defines who takes over the business after the owner’s death and the ownership transfer processes. The plan can specify whether the successor will be a family member, trusted employee, or third-party buyer.
Trusts
Trusts allow business owners to transfer ownership of their business or business assets without going through probate, providing a smoother, faster transition. By placing business assets into a trust, owners can ensure their business remains operational during probate.
Buy-Sell Agreements
Buy-sell agreements detail how to transfer ownership interests upon an owner’s death or departure from the company. These agreements often detail specific processes and include a valuation method to minimize uncertainty about the value of business interests. They are essential estate and succession planning for business owners with co-owners or partners.
Tax Planning and Optimization
Businesses are subject to different and reporting requirements than individuals. Without proper planning, estate taxes can significantly reduce the value of a business passed on to heirs. Estate planning allows business owners to minimize these taxes through strategies like lifetime gifting, life insurance, or using trusts, preserving the value of the business for the next generation.
Unique Estate Planning for Small Business Owners Challenges
Small business owners, especially family-owned and closely held companies, often face unique estate planning challenges. Estate planning for small business owners must address not just your personal assets and liabilities but also the entity’s assets, liabilities, and relationships.
These challenges vary by your role at the business, too—particularly whether you are a sole owner or among multiple owners.
Continuity
For small businesses, the owner is often central to daily operations. A comprehensive, interwoven estate and succession plan ensures the business can continue functioning without the central owner. Without a clear plan, the company may face instability, potentially affecting employees, clients, and profits.
Governance
Small business owners often operate with significantly less formality than large companies. Establishing clear business structures and policies is frequently a core part of estate planning for small businesses. You formally address issues like roles and responsibilities, ownership transfers and sales, how the business operates, and how to wrap up business activities.
Valuation
Determining the value of business assets can be complex, especially for closely held businesses or intangible assets like goodwill. Through estate and succession planning, you can establish a valuation method. This method may involve professional appraisals or a formula in the business’s governing documents or the owner’s estate plan.
Employee Protection
Small business owners typically have deep relationships with employees, especially in family-owned businesses. Estate plans can include provisions to protect employees, ensuring job security and business continuity.
Beneficiary Disputes
On the personal side, for small businesses, especially family-owned businesses, an unclear or nonexistent estate plan may be particularly likely to lead to an increased risk of conflict during estate administration. Disagreements over who should manage or inherit the business can seriously strain relationships.
Employee and Partner Disputes
On the business side, employees who have been integral to the company’s success may expect certain benefits or positions. In contrast, business partners or stakeholders may have differing views on the company’s future. To the extent possible, estate planning for small business owners involves anticipating these conflicts and either preventing them or establishing processes to resolve them.
How BrewerLong Can Help
BrewerLong provides personalized estate planning services for business owners throughout Florida. With years of experience, our team of skilled attorneys works closely with clients to design comprehensive estate plans.
Our unique approach includes a combination of estate planning and business planning driven by a deep well of knowledge about both fields. Contact us today to schedule a consultation or learn more about our estate planning services.