Where Business Formation & Estate Planning Overlap
Even the most successful of businesses can fail if key documents governing their future management have not been drafted and put in place. These documents include a last will and testament, financial power of attorney, living trust, and others.
And yet 80 percent of entrepreneurs surveyed failed to have a financial power of attorney in place, with 65 percent having nothing at all – not even a last will and testament or a living trust. While insurance can cover very specific disasters, only proper, intelligent estate planning can ensure that your family and company are taken care of. If you own a business and care about its future, you must have a succession plan in place.
Business Formation Options
You have several options when it comes to what format you want to choose for your business. So, for example, if a business has two owners, you could select a:
- Traditional corporate format: if you want to limit your personal liability or intend to sell shares to raise money from investors;
- Traditional Partnership: if you want to operate with simpler taxation and less formality; or
- Limited Liability Company (LLC): if you want a combination of all of the above.
Many business owners organize as an LLC because it offers many advantages, such as control over the company, control over how it is managed and how profits are divided, a lack of personal liability for any issues that come up with the company, the avoidance of double taxation, being able to report the company gains and losses on your individual tax returns, and no need or a board of directors, amongst others.
How This Affects Estate Planning
If operated in the form of a sole proprietorship or general partnership, losses or troubles your company experiences can affect your personal savings, investments, and assets, which in turn can have significant implications for your estate planning. When you organize as an LLC, while the LLC’s assets can be at risk if there are judgments against the company, your personal assets are not.
In order to draft a will, you need to work with an experienced professional estate planning attorney. That attorney can not only help you put the proper paperwork together to establish the proper business format, but help you plan for the future of the business if something happens to you.
You might also want to consider both a Living Trust to own your share of the LLC and a proper financial Durable Power of Attorney. Remember, the three essential legal documents that business owners should consider when drafting an estate plan are financial power of attorney, a living trust, and a last will and testament.
Experienced Business Litigation & Estate Planning Attorneys Serving Florida
Due to the complexities of establishing a business and drafting a will, working with the very best attorneys should be a top priority. At Suncoast Civil Law, our team of skilled attorneys have the experience, knowledge, and skills to protect you and your family. Contact us today for a confidential consultation.