Legal ServiceBusiness Formation and Estate Planning for Business Owners
BUSINESS FORMATION AND ESTATE PLANNING BUSINESS LAW FIRM SERVING FAMILIES THROUGHOUT MIDCOAST MAINE, CAMDEN, ROCKPORT, ROCKLAND, NORTHPORT, BELFAST, WARREN, UNION, HOPE, WALDO ME, AUGUSTA MAINE.
Why would an estate planning law firm also concentrate on business law? Because a business is often the most valuable asset of an estate. The failure rate of family owned businesses after the founder dies is very high. Many owners lose the value of what they have worked for by failing to plan for succession.
Business Planning IS Estate Planning
Planning Starts At Formation
Penbay Estate Planning Law Center is a law firm in Camden Maine. Our midcoast Maine law firm are also business lawyers because of the estate planning issues that face the entrepreneur or business owner. A successful business owner or entrepreneur is focused on getting the business off the ground and flying. But all too often they don’t think about the landing. It is important that business owners have consistent planning throughout the life of their business. At the beginning it should be formed the right way, choosing the appropriate entity, and making sure there is a buy-sell agreement or a succession plan if there are partners. When the business owner is in the thick of it, and the business is succeeding, there are yet other issues including maintenance of limited liability, asset retitling, and valuation issues. When you are ready to retire, or are forced to retire whether you’re ready or not, there are also different planning issues. But if you formed the company the right way with an estate planning lawyer, this unexpected retirement will not be the family-devastation it could be.
That’s the difference between a good plan and no plan. But you have to recognize the need for planning and continuous care, and the sooner you do the softer your landing will be.
Use the Camden ME lawyers at Penbay Estate Planning Law Center to:
- Form Your LLC or Corporation
- Operating Agreements
- Buy Sell Agreements
- Business Succession Planning
Family Owned Businesses
Loss of Value in the First Generation: 66% Of Initial Transfers Fail
Family Owned Business
Almost 70% of family owned businesses fail in the second generation. Of the ones that survive only about 12% of those make it to the third generation, and 3% survive to the fourth generation. Just to highlight this fact, two-thirds of all initial transfers fail. If you’ve ever started and built a successful business that statistic should hurt you. Why? Because when you build something with your blood sweat and tears, you want it to be valuable to your family after you’re gone. But the statistics show that is usually not what happens. Of the one-third that survives an initial transfer, only one-half will survive a second transfer
Additional Issues For Business Planning
You Can Prevent Loss
Don’t Let Your Family Owned Business Become a Statistic
The failure rate of an inherited family business is very high. Even though not every child or grandchild is cut out to run a business the failure rate of the business need not be connected to the business acumen of a child or grandchild. A good succession plan can insure that the family benefits from the business whether they should manage it or not.
We ask the right questions to determine if your family will get the benefit of your hard work or if it is likely to be one of the statistics.
By keeping your business planning with your estate planning lawyer, you can make sure that the estate plan will work. That your business is in tune with your estate plan goals.
Business Succession Planning
How to Succeed for You and Your Family
We can help you calculate how much liquidity the family will need if the business owner must suddenly stop running the business.
Every business owner should have a succession plan. A succession plan can be basic or complex, and is different at every stage of the business. At the very least it can include a buy sell agreement that deals with the estate or beneficiaries of the business owner after they’ve passed away. In greater detail, it can include insurance policies owned by the business or a trust based on the potential need for liquidity and avoiding estate and gift taxes. There is also a desire on the part of many business owners making an estate plan to avoid probate court. There are many reasons to avoid probate court, but in the instance of a business owner’s death, the time it takes to get approval from Court for a personal representative to act can be very costly.
That is yet another reason to use an estate planning law firm for business planning needs. For example, using a trust as part of a business succession plan, and a buy sell agreement, can avoid probate, and remove delay in the execution of the plan.
What is a Buy Sell Agreement
Partners and Joint Owners Can Protect Their Family
Every business owner who has partners should have an agreement that spells out what happens to the business, and their ownership interests if a partner dies, becomes disabled, gets divorced, or wants to retire. This kind of agreement is called a Buy Sell Agreement.
Although those are the major reasons for making a buy sell agreement between business partners there can be others. Every business and every family is different. For that reason, a good buy sell agreement is tailored to the individual situation and needs of the business owners.
The important questions to ask are:
Who can carry on the business during a transition if the business owner dies or becomes disabled?
Does the business owner have a trust-based estate plan?
Should one be considered?
The benefits and uses of different buy sell agreements are dependent on the circumstances. Some of the uses of buy sell agreements are:
- Establishing tax basis for a business interest for the surviving owners after death or retirement of a partner
- The method of funding the buyout of a retiring partner or the estate of a deceased partner
- How that buy out will be taxed
Estate planning attorneys who are tuned in to the issues of business owners are able to coordinate the estate plan documents with the business plan documents to prevent the loss of value to a business if the owner unexpectedly dies or becomes disabled.