Bylaws? Operating agreements? Choice of business entity? Those may not sound like estate planning topics, but they most definitely are. In fact, all too often, entrepreneurs are so busy developing and then running their businesses, they don’t take the time to address legal issues that can make the difference between failure and success.
What are some of those important legal issues?
- choosing the proper organizational structure (C- corporation, S-Corp partnership, LLC)
- buy-sell arrangements
- corporate restructuring
- tax reduction
- succession planning (in the event of the death, disability, or retirement of a current owner)
“If you own a business or a professional practice, it is even more important that your estate planning begin today,” Entrepreneur Press cautions. “As a business owner, it’s quite likely that a significant portion of your wealth – and your family’s source of income after your death – is tied up in the family business…The success of your estate plan is dependent upon the business being transitioned to the next generation or sold to someone outside the family for a fair price. Either result takes years of planning and preparation, sometimes as much as 10 years.”
The fact that a business will literally die when the owner retires or dies does not mean the business can be ignored for estate planning purposes. For one thing, as entrepreneur.com so rightly points out, liability does not die with the owner, and the family will need to consider procedures to reduce the applicable statute of limitations. Steps can be taken to avoid estate tax on a business that no longer exists.
While many entrepreneurs are focused on growing the business, they often neglect to consider what will happen if they are injured, writes Fred Cohen in business.com. “By failing to have a plan that enables the business to continue operating, partners, owners, and family members will be left scrambling to manage the business assets, and disputes are likely to arise.”
“Without a plan in place for how various scenarios should be dealt with, the continuity of that business can be compromised,” Tamara Schweitzer observes in Inc.
The attorneys of Rebecca W. Geyer & Associates, PC counsel clients on a range of business issues, including choice of business entity, preparing and filing the organizational documents, business record keeping, succession planning, and advising clients on critical planning issues which entrepreneurs face.
All these things are, we know, very much a part of estate planning!