Estate planning, in general, has many benefits. From protecting your assets from excessive taxes, to determining how your assets will be distributed upon your death, an estate plan can benefit anyone. The benefits of estate planning for family-owned businesses should not be overlooked. Family business owners need an estate plan for business, to aid in making important decisions regarding business organization and to prepare for succession of that business to the next generation.
Business estate planning involves business formation
Business formation and business succession planning can be very complex issues, with the various tax issues involved, especially with family-owned businesses. While a Limited Liability Company (LLC) may be the preferred business entity, because of their flexibility and simplicity, there are other types of entities to consider, as well. A business planning attorney can help you to determine the best business entity for you, depending on your circumstances.
Business succession planning is critical to the survival of a family business
Business estate planning also involves succession planning, which means determining what will happen to your business upon your retirement, death, or disability. Despite the general desire that family business owners have to see their businesses passed on from generation to generation, many business owners do not have a succession plan in place. Without an appropriate plan, your family may be forced to sell the business or its assets after your death.
Business estate planning can help reduce tax consequences
A proper estate plan for your business can do wonders for maximizing your business assets throughout your lifetime. It can also help to ensure those business assets are properly protected and distributed later on, all while helping to reduce the tax consequences of transferring your business on to the next generation.
Common tools for business estate planning
There are several tools from which family-owned business owners can choose, to accomplish their estate planning goals. Some of those tools include: Family Limited Partnerships & LLCs, Irrevocable Life Insurance Trusts, Personal Residence Trusts, and Joint Accounts or Joint Ownership. Which planning instrument is best for accomplishing your family’s business goals, is something you can discuss with your estate planning attorney.
Family Limited Partnerships & Limited Liability Companies
These two separate business structures can be used to provide parents or business associates with the authority to retain management and control over the business assets, while allowing those assets to be gifted to their children. These particular structures are very useful for small businesses and families who own a significant amount of real estate, and want to keep that land in the family for future generations.
As with all estate plans, there are many factors that must be considered to determine the options that are most beneficial to you, your business and your family. If you have questions regarding small business estate planning, or any other family-owned business issues, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.