Estate Planning
Business Owner Estate Planning
Business owners face estate planning challenges that go beyond what a standard plan addresses. Succession, liquidity, buy-sell agreements, and the transfer of business interests require coordinated planning that protects both your family and your business.
For business owners, the business is often the most valuable — and most complex — asset in the estate. A standard estate plan that works well for a salaried employee may be wholly inadequate for a business owner. Succession planning, business continuity, buy-sell agreements, and the tax-efficient transfer of business interests all require specialized attention. Wagley Law serves business owners throughout Lafayette, Lamorinda, Contra Costa County, and the SF Bay Area — without a comprehensive plan, the death or incapacity of a business owner can create a crisis for the business, the family, and the other stakeholders who depend on it.
Business Succession Planning
Succession planning addresses the fundamental question: what happens to the business when you are no longer able to run it? The answer depends on your goals — whether you want to pass the business to family members, sell it to a co-owner or third party, or wind it down. A succession plan identifies the successor, establishes a timeline and process for the transition, and puts the legal and financial structures in place to execute the plan. Without a succession plan, the business may be forced into a sale at an unfavorable price, or may simply fail.
Buy-Sell Agreements
A buy-sell agreement is a contract among business co-owners that governs what happens to an owner's interest when a triggering event occurs — death, disability, retirement, divorce, or a desire to sell. A well-drafted buy-sell agreement ensures that the remaining owners can acquire the departing owner's interest at a fair price, that the business continues without disruption, and that the departing owner's family receives fair value. Buy-sell agreements are often funded with life insurance to ensure that the purchase price is available when needed.
Transferring Business Interests
Business interests — whether in a corporation, LLC, or partnership — can be transferred to heirs through a trust, gifted during your lifetime, or sold as part of a succession plan. Each approach has different tax, legal, and practical implications. Lifetime gifting of business interests can reduce estate taxes and transfer future appreciation out of your estate, but must be coordinated with valuation discounts, gift tax annual exclusions, and the overall succession plan.
Liquidity Planning
One of the most common estate planning challenges for business owners is liquidity — the ability to pay estate taxes, debts, and administration expenses without forcing a sale of the business. If the business represents the majority of your estate, your heirs may face a choice between selling the business and paying the estate tax bill. Life insurance, installment payment elections under the tax code, and other liquidity strategies can address this challenge and give your heirs the flexibility to keep the business if they choose.
Incapacity Planning for Business Owners
Incapacity planning is especially important for business owners. If you become unable to manage the business due to illness or injury, someone must be authorized to step in and keep operations running. A durable power of attorney for finances, combined with appropriate provisions in your business's operating agreement or bylaws, can ensure that a trusted person has the authority to manage the business during your incapacity — without the need for court intervention.
Coordinating the Business and Personal Plans
Business owner estate planning requires coordination between your personal estate plan and your business documents — the operating agreement, shareholder agreement, buy-sell agreement, and any employment or compensation arrangements. Changes in one area can affect the others. A comprehensive review ensures that your personal and business plans work together, that there are no gaps or conflicts, and that your overall goals are achievable.
Own a Business in the Bay Area?
Wagley Law helps business owners in Lafayette, Lamorinda, and throughout the SF Bay Area create estate plans that protect their families and their businesses. Contact us to discuss succession planning, buy-sell agreements, and business interest transfers.
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