Some business owners refer to their business as their “baby,” and with the amount of time and money spent on one’s own business, I can see why. While much of my time as an estate
planning attorney is spent helping my clients care for their human families, I can help many of my clients care for their business “babies” as well. The two biggest areas of concern are the same as with human families: 1) what happens if clients lose the capacity to care for them, and 2) what happens on the client’s death?
Generally speaking, the complexity of the business determines the complexity of the succession planning necessary. If your business has very little value apart from the business owner, you may need to simply grant a trusted person the decision-making authority in case you become incapable of attending to your business and then include any assets in your family revocable trust. This may be appropriate if your business does not have employees, has limited overhead and the value really depends on the services you provide.
However, if you have employees, produce a product, own inventory or valuable equipment, have commitments under long-term contracts, own real estate or other large assets, then a Limited Liability Corporation, Family Limited Partnership or S Corporation may be more appropriate. The type of structure may depend on the tax treatment and your family situation. Either way, it is crucial that your CPA and your estate attorney collaborate to build the appropriate safe-guards, as well as incapacity and succession planning.
As a business owner, your day-to-day activities may consume the majority of your attention. However, as a business leader, long-term planning (including planning for your potential incapacity and death) are crucial to the continuation of your business “baby.” If other people depend on you for goods and services or for employment, you have an obligation to consider how your business will continue without you at the helm.
Originally posted by Susan on January 27, 2014.