Planning for the transfer or liquidation of your business when you are ready to retire or when you die is just as important as the planning you did in starting up your small business. Here are some tips from a Creative Business Lawyer™ on how to use estate planning strategies to transfer your business interests:
Business Structure – How your business is set up – as a partnership, a sole proprietorship, an LLC, a C Corp or an S Corp – can have a great impact on estate taxes. If you want to preserve your business for future generations, a family limited partnership can allow you to transfer ownership of the business to children as limited partners and enable you to maintain control over the business. Setting a business up as a corporation allows for the issuance of stock to the owner and common stock to children utilizing the IRS’ estate freeze rule, which decreases tax liability.
Trusts – Business owners can use trusts to remove the value of the business from their estates and pass business interests on to the next generation while maintaining some control over the assets.
Buy-Sell Agreements – If you plan to transfer a business to a partner or partners upon your retirement or death, a buy-sell agreement is a necessity. Having the agreement specify the transference of sale proceeds to a trust for your beneficiaries keeps the value of your business out of your estate, so your heirs will not be hit with a hefty estate tax bill.
Estate planning for businesses can be complicated, so small business owners should consult with a lawyer to ensure the right strategies are put in place for your individual circumstances.
This article is a service of Kundani& Chang LLP. We are an award-winning law firm that specializes in business and estate planning for clients like you. The goal for every family is to stay educated on all topics like this, avoid probate, avoid estate taxes, and build a legacy for you and your loved ones. What sets our firm apart is that we build lasting, lifelong relationships with our clients. They rely on us to keep them updated, provide sound legal counsel, and be there for them immediately if any problems should ever arise. The best part is we don’t charge hourly fees to our families, so you never have to worry about speaking to us. If you’re ready to keep your family out of Court, contact us today to schedule an initial consultation or visit our website at www.CaliforniaEstateLawyers.com.