Page 7 - Jupiter West - May '22

Jupiter West, Page 7
What Happens To Your Business When You Die

Submitted by Anné they leave their interest to one or more co-owners. In this of probate, leaving more for your heirs. Strategies used to
Desormier-Cartwright, J.D. case, a buy-sell agreement can ensure that the decedent’s avoid probate may also minimize estate and inheritance
You spend a significant beneficiaries do not unintentionally become owners. taxes that are levied on the decedent’s assets. The threshold
part of your life building your 3. Plan for management and ownership. Your for the federal estate tax is quite high, but 16 states and the
business, and it becomes a business succession plan must do more than simply name District of Columbia also have an estate tax, an inheritance
major part of your legacy. who receives your business. A succession plan should tax, or both (Florida does not).
But when you die, everything address issues such as training and supporting successors; • The business fails. Succession planning does not
you have built could fall delegating duties to successors; naming outside directors, guarantee the continued success of the business after you
apart if you have not taken advisors, and professionals; designating who will own the die. Although the eventual outcome is outside of a deceased
the time to create a business business versus who will manage the business; and retaining business owner’s control, you can take steps to position the
succession plan. Without a key employees. Thinking ahead about such issues will business for success. Small details matter. Is your chosen
plan in place, your business’s improve the odds that ownership and management changes successor likely to work well with existing associates? Are the
fate may be decided by a court instead of according to your won’t cause the business to fail. best interests of your business and the best interests of your
wishes. You can take actions now to position your business 4. Get creative. Wills, operating agreements, and family compatible? Should you transfer the business during
for continued success – even when you are no longer around buy-sell agreements are common legal documents used your lifetime? How will your departure from the business
to run it. Depending on the type of business entity you have to specify what happens to your business when you pass affect suppliers, creditors, customers, and employees? When
formed, a business succession plan can be addressed in your away. There are some other solutions that might work well, did you last review your estate and succession plans, and have
last will and testament, the business’s operating agreement, or however, depending upon your particular situation. One there been significant changes to the business since then?
in a buy-sell agreement. Consider consulting with an attorney solution is gifting the business to a successor while you are Understanding business succession and creating a
who can explain the options for business succession planning still alive. Another is to create a living trust and transfer comprehensive plan can allow your company to thrive
and help you take the necessary next steps. the business into the trust during your lifetime, with the in your absence. Don’t leave anything to chance. Talk
Business Succession Planning Considerations person you want to succeed you named as the successor with experienced business law, tax, and estate planning
Before you create a succession plan for your business, trustee who will step into your shoes at the time of your professionals about how to protect the legacy of your business.
keep in mind the following key steps: death. Other succession strategies you can consider involve If you have questions about your estate plan and what
1. Determine the type of business entity. Is your creating a sophisticated trust or setting up a family limited documents you should have in place to plan your estate,
business a sole proprietorship, partnership, limited liability partnership or a family limited liability company. schedule a free consultation today by calling our office at
company, or corporation? The type of business entity affects The Risks Of Not Having A Plan (561) 694-7827, Anné Desormier-Cartwright, Esq., Elder
more than just taxes and day-to-day operations. It can also Not having a business succession plan could lead to & Estate Planning Attorneys PA, 480 Maplewood Drive,
affect the succession planning options available to you. If headaches and disputes for your heirs and damage the Suite 3, Jupiter, FL 33458.
you own your business as a sole proprietor, for instance, no company you spent years building. The following are some The content of this article is general and should not be
one else has an ownership interest, so you are free to pass risks of not having a plan: relied upon without review of your specific circumstances
the business on to your chosen successor (or successors). • Business assets and ownership will go through by competent legal counsel. Reliance on the information
But if co-owners are involved, your share of the ownership probate. Business assets, including ownership interests, herein is at your own risk, as it expresses no opinion by
could be distributed to them per the terms of an operating generally must go through the probate process upon an the firm on your specific circumstances or legal needs.
agreement or other legal document. owner’s death. This may not be a problem if your will An attorney client relationship is not created through the
2. Determine who gets the business. Some owners describes in detail the distribution of business assets to information provided herein.
want to pass their business on to their family, and it may beneficiaries. But if your will is silent on this subject, the To comply with the U.S. Treasury regulations, we must
make sense to do so in a will upon the owner’s death. Other assets will be divided among your beneficiaries when your inform you that (i) any U.S. federal tax advice contained in
owners may want to have the business sold after they die so estate is settled. At that point, your business is unlikely to this newsletter was not intended or written to be used, and
that the proceeds can be distributed to their beneficiaries. end up in the hands of the successor you would have chosen. cannot be used, by any person for the purpose of avoiding U.S.
Business owners can also leave their businesses to nonfamily • Your heirs will owe taxes and expenses. Probate federal tax penalties that may be imposed on such person and
members, such as employees or charity. Still, some owners expenses are paid out of the estate. Through careful (ii) each taxpayer should seek advice from their tax advisor
may prefer that the business continue to operate while planning, you may be able to transfer business assets outside based on the taxpayer’s particular circumstances.

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