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The Schomer Law Group, Los Angeles and Los Alamitos Estate Planning Attorneys

The Schomer Law Group, Los Angeles and Los Alamitos Estate Planning Attorneys

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Estate Planning Attorneys Help Sole Proprietors With Their Business Plan

March 26, 2018Estate Planning

estate planning attorneys Sole proprietors need business estate planning, possibly more than other business entities.  Sole proprietors need more protection because their personal assets are not actually separate from the business.  That means, when you pass away your business cannot continue unless you have a business estate plan in place.  Unless you provide a specific plan of action in place, your expectations for business succession may not be realized. Let our estate planning attorneys help.

Why a business estate plan is essential

All businesses involve risks and all business owners are exposed to legal or financial risks, as they operate their businesses.  Starting a business, in itself, brings a certain amount of financial risk.  The reality is, not all business owners recognize ever risk, legal or financial, to which they are exposed.  Every legally binding agreement that you enter into has its consequences.  With an appropriate business plan, you can reduce financial and legal risks.  Let our estate planning attorneys help you get started.

What makes a sole proprietor different?

When the owner of a sole proprietorship dies, the business will cease to exist unless a successor takes over. Unlike corporations and partnerships, a sole proprietorship does not have a separate legal existence.  Instead, the tax obligations and debts of a sole proprietorship are linked to the owner of the business.  Either the business will dissolve or ownership must be transferred to someone else.  If you want your business to continue, you have to create a business estate plan to make sure that happens.

Estate planning issues faced by many sole proprietorships

One particular concern for sole proprietors is how to protect their family’s financial future. For that reason, most sole proprietors include terms in their estate plans that direct the sale of the business or that appoint a relative to take over business operations.  There are often tax consequences when a sole proprietor passes away.  Without the proper estate plan, business assets will pass on to the next generation with significant estate and inheritance tax consequences.  This is why it is so important that the business assets of a sole proprietorship be included in your general estate plan.

Ways to protect your business assets

One important aspect of business planning, and particularly asset protection, is liability insurance.  They type of insurance you will need to provide appropriate protection for your business assets depends on the status of your business.  Your insurance needs will likely change as your business develops.  Adding an umbrella policy to your standard liability insurance coverage is wise because it provides individual protection, as well as homeowner’s and auto insurance coverage.  Another way to provide asset protection for business owners is to establish a pension plan.

When should you establish a business plan?

Before there is any indication of financial or legal issues, you need to take affirmative steps to protect your business assets through a business estate plan.  In additional to being a very prudent decision to make for your business, creditors have a more difficult time challenging any transactions or asset transfer you make.  By completing your business plan early on, there are always more options available to head off any potential financial problems. If you have more questions, let our estate planning attorneys help.

Understanding the benefits of pass-through businesses

Pass-through businesses are the most common entity chosen for family-owned and closely-held businesses. Consequently, the number of pass-through business entities has increased substantially over the last 30 years. On the other hand, the number of traditional corporations has decreased. Now, pass-through businesses make up nearly 94% of all businesses, and they earn more than 64% of total business net income in the United States. Also, pass-through businesses employ more than half of the workforce in the private sector.  Considering these statistics, it is easy to see some of the benefits of pass-through businesses.

Types of pass-through entities

The basic types of pass-through businesses include sole proprietorships, partnerships, Limited Liability Companies, and S Corporations. A sole proprietorship is an unincorporated business owned by a single individual. The business reports its income on schedule C of the 1040 tax form. Partnerships are unincorporated businesses with at least two owners, either individuals or other businesses. Limited Liability Companies (LLCs) have limited liability like a traditional C corporation. An S Corporation is a domestic corporation that can only be owned by U.S. citizens, with nor more than 100 shareholders.

Download our FREE estate planning worksheet today! If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.

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  • About
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Scott Schomer, Estate Planning Attorney

Scott Schomer, Estate Planning Attorney

A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Scott has served as a member of the Los Angeles Superior Court Probate Volunteer Panel (PVP Attorney), Probate Settlement Panel and a Judge Pro Tempore. Scott's expertise has been recognized by his peers with such accolades as a life-time membership in the Multi-Million Dollar Advocates Forum, the Five Star Wealth Manager designation, and repeated nominations as California Super Lawyer.
Scott Schomer, Estate Planning Attorney

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