Business succession planning and estate planning go hand-in-hand because businesses are often a major asset for a business owner. Working to ensure the asset continues after a death to provide value to the business owner’s family is just one way to ensure that loved ones are taken care of. A business attorney can work to identify areas of concern, create an exit strategy before death or put a plan in place in the event of death if there is a succession plan. By creating a business plan in Virginia, a person can be reassured of their assets after death.
A business planning attorney can also review all of the operating documents, the by-laws, any partnership agreements or buy-sell agreements; even the stock ownership of a company to determine if there is a method to better preserve it for an individual’s family. A business planning lawyer can also identify any of those areas of weakness that may be present in the event of a business owner’s death. For example, if a business is based primarily on the contract or the relationships of one business owner, the attorney may suggest that the other business owner be introduced to those contacts. If you need more assistance, call an established business planning lawyer today.
Steps Businesses Owners Can Take
A business owner can look at their estate plan to determine if their business interest is properly provided for. They can also review their operating documents, and any buy-sell agreements or partnership agreements that may be in place, to see how the business is or can be passed on to their children or to their family. Important ideas in creating a business plan in Virginia include forming an LLC, establishing a trust, and ownership.
Forming an LLC
There are a lot of reasons that someone may consider creating an LLC for their business interests. One of those reasons is to protect against creditors. Another reason may be to change the nature of the ownership of the business. Sometimes, LLCs are created for tax benefits. The creation of an LLC is something that may be discussed depending on the nature of the business and the individual business owner’s wishes for their business.
Establishing a Trust
When discussing business planning with a business owner, creating trusts depends on the nature, the size and the future plans. For example, some business owners consider creating a revocable life insurance trust so that they provide liquidity for the payment of any debts or taxes at the death of a business owner prior to the business being sold. Trusts can be an important part of a business owner’s estate plan, but it depends on the wishes, the family situation, and the business itself.
Ownership may or may not protect the interests of a business. The ownership of the business will dictate how the business is passed on after one of the owners dies. Whether or not there is a partnership or an LLC, or the deceased business owner is the majority or minor owner and what the buy-sell agreements state will dictate how the assets are passed on. In some cases, owning a property or owning a business interest as tenants by the entirety or joint owners with right to survivorship may provide some creditor interests but, often, that is during the lifetime of the business owner and not after that.
When to Start Creating a Business Plan in Virginia
There is no bad time to begin personal estate planning or to begin planning for the future of a business. Once an individual is sick or incapacitated, it is difficult to put those types of plans in place. When a business owner is healthy and there is no emergency, that may be the best time to create a business plan. Those plans are meant to be organic, so they may grow and change over the lifetime of a business owner, but starting as soon as the business is created may be beneficial to an owner.
A financial institution is cognizant that someone needs the authority to act on behalf of an individual’s estate. Where this can be particularly difficult is where the business owner is the sole owner or is the sole person listed on a business account. In that case, someone may be appointed on the business owner’s personal estate as the personal representative to be able to access or allow for the authority to change the ownership of the account so that it can be accessed by a business.
In some cases, that means that accounts can be frozen and the operations of a business can halt after the death of a business owner and during the initial probate process until an individual is appointed to serve. That halt can result in the business failing to meet deadlines or pay payroll or to honor contracts and can significantly reduce the value of the business, if not shut the business down enough to destroy it as a major asset. There are many nuances in creating a business plan in Virginia, talk to a professional lawyer for more on the subject.