Estate Planning Documents to Consider Using For Small Business Owners
With the correct legal documents; small business owners can transfer a restaurant, accounting practice, car repair shop, or any small business to the right people. The right people may be family members. They may be co-workers. In some instances, they may even be competitors.
Partners need to think about who will get their partnership interests. Stockholders should name who will own their stock. Corporations should analyze who will replace an executive who dies or can't work.
Documents for small business owners
With the right documents you can:
- Choose if your business will be sold or if the business will continue to another generation
- Decide who gets your interest in the business
- Help reduce the taxes that will be due
- Help determine who runs the business when you’re deceased or unable to work
- Avoid litigation between different family members
An experienced Florida business lawyer explains the pros and cons of the following documents
- A will. With a will you:
- Select an executor who manages the business until it can be sold or transferred.
- Decide who gets your business interest or business share.
- Provide necessary information about the business in a secure place. This includes account numbers and passwords.
- Choose how the business will be sold.
- Trusts have the following benefits:
- They avoid the cost and time involved with probate
- The business transfer is private
- Can help reduce the estate and inheritance taxes?
- Appoint a trustee to manage the decisions about the business until it is sold or transferred
- Decide who gets your business interest or share.
- Power of attorney. A power of attorney appoints someone to run your business if you can’t or if you die. Without a power of attorney, the local court determines who will manage the business. Court involvement means time and money. Therefore, it can also mean conflict because different people may claim they should be the ones to run the business.
- A buy-sell agreement. If there are many owners, this contract determines who can get your share. Typically, the buy-sell agreement sets the sales price for your interest. It decides which owners can and can't buy your interest. Additionally, it also allows you to choose a non-owner (such as a family member) the right to buy your share. A buy-sell agreement can establish other parameters too such as whether the purchase can be by cash, secured loan, or other means. Thus, it can set a time-limit and decide who has the first option to buy.
- Insurance for the business. Anyone who can buy your business after your death should consider buying term life insurance that names them as beneficiaries. The insurance amount is typically the amount of money needed to buy your share of the business. Furthermore, another option is an irrevocable life insurance trust which has tax advantages.
- Insurance for your family. Most businesses are a major support source for your spouse and children. Without the income from the business, your family will lose this income source. Therefore, the insurance amount should match the income your business provided your loved ones.
Documents for partners and corporate owners
Partners and corporate owners should review extra documents. Your Florida estate document lawyer will review the following
- A partnership agreement. If you don’t have a written partnership agreement, you need one. If you do have an agreement, it should be updated. Wills, insurance policies, and other documents help to complement the partnership agreement.
- Stock certificates. Stock owners should name their beneficiaries, if allowed, on their stock certificates. The naming determines who gets the stock and may avoid the need for probate.
- Corporate by-laws. The corporate by-laws control the creation, management, and dissolution of the corporation. Small business owners need to review these bylaws with their attorneys. Large corporations generally have their own legal counsel. Shareholders should still understand how they by-laws affect their interests.
Other related business documents your lawyer will review are:
- Any corporate or business contracts
- IRA accounts
Arrange a consultation with a respected Florida estate planning lawyer today
The right estate planning documents give you, your family, co-owners, and employees one of the greatest assets possible. Peace of mind. The experienced lawyers at Lulich Attorneys and Consultants are ready to help.
We’ve been advising business small owners about their estate planning needs for 30 years. To schedule an appointment, please call us at 772-589-5500 (Sebastian) or 772-774-7771 (Vero Beach).