Business Formation & Succession Planning
Business formation and succession planning can be challenging because of the tax issues and dynamics among the owners. This is particularly true if the business is family owned.
A Limited Liability Company (LLC) has become the most flexible and preferred entity for most operating businesses. LLCs combine tax planning flexibility with administrative simplicity, legitimate asset protection, and a built-in plan for succession of interest after the business owner retires or dies. LLCs provide a powerful tool for estate planning, too. Families who may not operate going businesses can still benefit from the protection and flexibility that LLCs provide, by creating a proven and reliable structure to manage and distribute family property, such as a family cabin, to children or future generations. Whether it is a Corporation (S Corp or C Corp), Partnership (general or limited), or an LLC, at Hallock & Hallock we will counsel with you in determining the right form of entity for your situation and draft customized agreements to meet the needs of your particular entity, including operating agreements and buy-sell agreements.
At Hallock & Hallock, we will also counsel with you on such difficult decisions as what will happen with the business upon your retirement, death, or disability. Most business owners do not take the time to plan for how they will leave their business. They are busy running the company, or they don’t know where to start. But if you continue to own a business until you die, it will be included in your estate and could be subject to substantial estate taxes. Your family could be forced to sell the business or its assets at “fire sale” prices.
Planning for how you will exit from your business should be an integral part of your estate and retirement planning. Proper planning now can provide you with retirement income, reduced income and estate taxes, and even let you benefit a charity if you so choose, regardless of whether you transfer your business to family members at discounted values, to employees, or to an outside buyer. Planning now to exit your company will result in you and your family receiving the best possible results, both now and after your retirement, disability or death.