SMALL BUSINESS OWNERS: BUSINESS AND AN ESTATE PLAN
WHY SMALL BUSINESS OWNERS MAY WANT TO COORDINATE THEIR BUSINESS AND ESTATE PLAN.
For questions about business and estate planning, contact us today!
A small, family-owned business is often much more than a commercial enterprise: it can be a legacy passed down from generation to generation. Some people wish to transfer a company to their children, allowing their sons and daughters to either buy or inherit a commercially successful business.
This should be done carefully, and with the attention and oversight of an experienced attorney. Ownership in a limited liability company is delineated as a “transferable interest” or, more commonly, a membership interest. The Utah Revised Uniform Limited Liability Company Act governs these types of companies. Several unrelated business partners could have an interest in a Utah limited liability company. Their interests could allow them to vote on company decisions, receive profit distributions, elect a manager to run the company, or manage the company themselves.
Ownership in a corporation is represented by stock or shares. The shareholders elect a board of directors. The board of directors elects officers to run the company. Like an LLC, several unrelated business partners might own stock in a corporation.
When a business owner dies, his assets pass to his heirs. These assets include any transferable interest in a company, or stock in a corporation. If a business owner does not have an estate plan, the assets must pass through probate. That means the deceased owner’s family will have to go to court before thy can claim ownership of the business. Probate can be costly and time consuming. Many businesses languish while family members try to determine who should be entitled to run a small business after the primary business owner passes away.
Coordinating a good estate plan with a good business plan can eliminate this problem. For small, family-owned businesses, a trust eliminates the need for probate. It works like this: a business owner establishes a trust. The trust then takes ownership of the business. When the business owner dies, a successor trustee is appointed. This person may immediately manage the affairs of the business. This might include hiring a new manger, executing a buy-sell with the business’s remaining partners, selling the deceased owner’s interest in the business, or dissolving and liquidating the business’s assets. Because a successor trustee may generally pursue these actions immediately after the death of the business owner, a trust is far more efficient than probate.
However, to achieve this result, a business owner must carefully coordinate his business and estate plan. Careful drafting will allow the business owner’s estate plan to work in tandem with his company or corporation. Any business owner should seek the advice and guidance of an experience attorney to create a well drafted estate plan and business plan.
If you have questions about your small business plan and estate plan, contact the experienced Provo attorneys at Howard Lewis & Peterson, P.C. today.
