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Business Succession

Small business owners face unique challenges when establishing an estate plan. If you are a business owner thinking about succession, estate planning or both it is essential that you speak with a qualified Orange County estate planning attorney. At the Law Office of Jonathan D. Alexander, we help business owners create a plan for the future by identifying and dealing with legal and business issues in order to enable the business to continue to thrive.

Start with Estate Planning

The proper place to start is to create an estate plan. Appropriate business estate planning helps on two fronts:

  • You will authorize someone you trust to take over your business when you cannot operate it or have passed away, which protects your business and your customers.
  • You will provide certainty and security for your family by putting your wishes in writing, which makes it easier for your family if you die suddenly or become incapacitated.

Many business owners utilize living trusts to avoid the delay and expense of probate and simplify the transfer process for surviving family members. A comprehensive estate plan also includes a durable power of attorney that authorizes a trusted personal representative to manage your financial and business affairs if you become unable to do so. A proper plan also includes an advance health care directive that appoints an individual (typically a spouse) to make medical decisions for your when you cannot make these decisions yourself.

Tax Planning

The current estate tax exemption is extraordinarily high ($12,060,000 for an individual and 24,120,000 for a married couple) and may not be the driving force of your estate plan. Your primary concerns may include the orderly transfer of your business to your family, management and creditor issues, and income tax considerations. If estate tax planning is a concern, there are numerous strategies that can be employed by your qualified business estate planning lawyer that may help you avoid federal death taxes altogether.

Family Matters

Dealing with a family-owned business and estate planning issues can be particularly difficult. Especially where there is a child who is interested in taking over the ownership and operation of the business and another child is not. Your estate planning attorney and financial advisor can assist you to navigate these troubled waters. A common solution to this problem is to gift the business to the child interested in the business and other assets of equal value to the disinterested child.

Foundational Documentation & Insurance Coverage

As a business owner, it is critical that you have the following foundational elements in place prior to a succession event.

  1. Corporate formation documents, articles of organization or incorporation.
  2. Operating agreement.
  3. Bylaws.
  4. Buy-sell agreement.
  5. Disability Insurance.
  6. Key person insurance.
  7. Succession plan that includes identifying employees who are essential to business operations if you become incapacitated.

During the estate planning process and prior to a liquidity event, exit, or succession it is essential you review your documentation and insurance coverages to ensure that you have your business affairs in order.

If your business has more than one owner, proper estate planning requires that your corporate documents are accurately drafted and up to date with current legal requirements in your state. Your operating agreement should include detailed instructions regarding common life events like:

  • Divorce
  • Incapacity
  • Divorce
  • Personal Bankruptcy

Your operating agreement should spell out the process or specific strategies that will be used to allow the business to continue to operate despite these life events, valuation procedures for ownership interests, and the options that surviving owners have to protect the company while paying fair market value to an affected co-owner. A common strategy is to employ a buy-sell agreement that stipulates how a partner’s share of a business may be reassigned if the partner leaves the business or dies.

Contact Us

Estate planning for business owners is a critical aspect of business ownership. At the Law Office of Jonathan D. Alexander, we understand the complexities involved with business estate planning. We offer consultations for small business owners in order for you to learn about our practice and how we can help you. To start the planning process today call (949) 334-7823.

Client Reviews

The pandemic had me thinking very seriously about my outdated Will, I contacted the Law Office of Jonathan D. Alexander and he quickly eased my mind about all of the details of my estate and outdated will. He handled every detail from end to end and I was able to complete my Living Trust with no...

Joanne T.

I am so grateful to have been able to work with Jonathan. I knew I wanted to have a Living Trust and I had no idea what to expect going into the process. Jonathan was easy to talk to and explained the process thoroughly of what was required. He was patient with my multiple questions and replied in a...

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