Estate Planning for Business Owners Lawyers & Attorneys

What would happen to your company in the event of a tragedy? How would ownership stakes be handled? How would you provide for your family or the family of a partner? Although considering these worst-case scenarios may seem morbid, working with a lawyer to establish a plan can protect your company and help you weather a difficult time. Priori is committed to helping you find an excellent lawyer for your business in our curated marketplace to ensure you have the necessary documents and plans in place.

Common Business Estate Planning Tools

Working with your Partners

A corporate attorney who has experience working with closely-held businesses can help you create agreements and establish procedures to protect your business should the worst occur. Working with a lawyer, you can implement a buy-sell agreement that governs what happens to a deceased partner’s ownership stake in the company, so you can retain control after a traumatic event and also, make sure your partner’s heirs are not stuck holding an unmarketable asset.

A lawyer can help you and your partners determine what type of agreement makes the most sense for your situation. Here are some considerations to bear in mind:

  • You can elect whether to make the agreement mandatory, which would require the business or your partner(s) to purchase your share of the business. If you do decide to go this route, each partner may also purchase life insurance and make the other partners (or the business--depending on the elected form) the insurance beneficiary, so executing the agreement doesn’t run the risk of putting you out of business. If you don’t make the agreement mandatory, you can implement a right of first refusal for other partners, the business or some other constrained pool of people.

  • A buy-sell agreement can apply to your partners (cross-purchase agreement) or the business itself (redemption agreement).

  • You should also decide what sorts of events would trigger the agreement. Common examples include death, disability, bankruptcy and voluntary departure.

  • When the agreement is triggered, you will also need a methodology to determine purchase price that should be included in your agreement.

  • When the agreement is triggered, you will also need a methodology to determine purchase price that should be included in your agreement.

A buy-sell agreement implemented in the early days of your business can provide peace of mind and clear processes when the worst occurs.

Making Personal Decisions

Once you and your partners have established how you will handle the ownership stakes of your business, you will then need to decide how to treat your personal assets within the predetermined framework.

In the absence of a controlling buy-sell agreement, you may pass your ownership stake through your will. A trusts and estates attorney who is familiar with closely held businesses can help you establish in your personal will and testament that your share in the business will pass to your designated heirs when you die.

Tax Considerations

You could end up owing a considerable sum in estate taxes (the estate tax exemption changes from year to year) if the estate planning for a business owner is not handled properly. Certain types of trust, partnership, and limited liability company arrangements can help you avoid probate, reduce estate taxes, or even avoid estate tax altogether. If you or your heirs seek to liquidate company stock that has appreciated in value, you may also face tax consequences.

If You’re the Sole Owner

Succession Planning  

The extent to which you need to prepare for the management of your business in the event of your death turns on how dependent your business is on the personal services you provide. You may consider training potential successors to take over your individual responsibilities in the event of your passing.

If You Don’t Have an Estate Plan in Place

The death of a business owner who does not have an estate plan can also mean the end of a successful business. The ownership stake in the business of the deceased will become part of his or her estate and then be passed to heirs under his or her will or pursuant to the laws of intestacy. The result could be unpredictable if the business is not specifically addressed.  In fact, the deceased owner’s stake could be split among several heirs. Without a will, the ownership stake will pass to the deceased partner’s relatives (with close relatives given priority) under the intestate succession statute of the state in which the probate court is located. The new owners will then be able to exercise control, either directly or indirectly, over the management of the company.   

Pricing

A Priori attorney can help you create the necessary documents to protect your business in the event of a tragedy beginning at a discounted hourly rate of $225/hour. Flat rate packages for simple will preparation may begin around $450, while more complex wills and trusts may be written with flat-rate packages between $950 and $1,500. More complicated estate planning documents, such as wills that include documents like health care directives and cohabitation agreements, can cost around $2,100. Very complex documents such as Inter-vivos trusts can cost up to $4,800 to prepare.

FAQ

I want my business to close when I retire or pass away. Do I need a lawyer?
Yes, and you should work with a lawyer to document your intent to terminate your company - reducing its value. If you do not, an estate tax for the value of the business may still be imposed on your family.

Get started by telling us a little bit about your legal needs and a member of our team will begin working on your matchmaking process.