I started my first business the summer of my sophomore year in college, and that business contributed to my schooling all the way through law school and the start of my own law practice. I’m rather embarrassed to admit it was an American Girl Doll repair business – which is weird, but it was super profitable and taught me a lot. I know exactly how many hats you wear as a business owner, how many long hours you put in, the triumphs and pitfalls which make your stomach sink just thinking back over them. I’ve been there, so I know exactly why you haven’t gotten around to paying and arranging for an estate plan.
Now that I’m older and wiser, I also know exactly what is going to motivate you to get it done: When you die, your business will probably die with you. All of the hours you have put in, the reputation you have built, the money you are owed, the value of your business, the requests your customers or clients have made but haven’t been finalized – all that will likely go up in flames without an estate plan and business successor plan.
Let’s face it: you have invested in your small business. Even after you pass, you probably don’t want to see things fall apart. You are proud enough of your accomplishments that you want to make sure things are handled properly, even if that means closing your business down the right way so that your reputation and business go out on a high note. Alternatively, if you want the business to continue, you want to make that transition seamless so that your reputation and business keep the same high standards even during the transition to new ownership or management.
If you own your business entirely yourself (either as an LLC or sole proprietorship) and don’t have your ownership share set up to transfer on death, when you pass on your business goes through probate. If you own a share of a business (as a partner of an LLC or traditional partnership) and you don’t have your ownership share set up to transfer on death, then your share of the business goes through probate. In both situations, this means means the probate court of your county is going to be having its hands in the running of your business. Trying to run a business going through probate is a nightmare. A new person is coming in to run things without your guidance and experience, and that person is going to be under the crushing administrative scrutiny of the probate court. Every contract and payment has to be approved.
Regardless of what your business is, you need to have plans in place. It can be an elaborate plan where your successor uses the company life insurance policy on you to buy out your trust’s ownership interest based on its market value, or it can be a simple plan where a family member tidies up all the loose ends, collects the final check, and closes up shop. Big or small, we are here to help you figure all of this stuff out.