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Business Planning 

A closely-held business raises several estate planning considerations.  For example, shielding other family assets from liability arising out of the business and having an owner exit strategy or succession plan in place.       

A business owner has several entity structures from which to choose.  While the limited liability company is the most flexible in terms of formalities and tax elections, it is not the right choice for all businesses or activities.  The entity selection process considers many factors, including, but not limited to, liability protection, income and employment taxes, accounting requirements, formality requirements, and the ability to raise additional capital.

A succession plan should be in place to ensure the ongoing viability of the business. This is particularly important if the departing owner is counting on the sale of his or her ownership interest for retirement. A buy-sell agreement should clearly outline the events that trigger the purchase of an ownership interest (e.g., disability, retirement, death) and ensure the interest can be purchased by the new or remaining owners.  Life insurance is often used to fund the purchase of an ownership interest upon the death of the insured.  There are a variety of approaches that can be taken to accomplish desired tax outcomes among the business and the owners. For a business that will remain in the family, it is important to transfer ownership to the next generation in a way that will minimize estate, gift, and income taxes.  According to one study (Small Business Review, Summer 2001), only 30% of all family-owned businesses survive to the next generation, and only 12% survive to the third generation.


Business Planning Articles

Leonard A. Hagen, J.D., LL.M.
Sound Estate Planning, PLLC
152 3rd Ave. South, Ste. 107
Edmonds, WA 98020
Phone: (425) 967-7287
len@soundestateplanning.com

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