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Florida Business Plan

FLORIDA BUSINESS PLANNING MADE EASY.

FLORIDA BUSINESS PLANNING MADE EASY.

UNDERSTANDING FLORIDA BUSINESS PLANNING WITH OUR JACKSONVILLE BUSINESS ATTORNEYS

Your business is your baby, your pride and joy. You’ve invested so much time into your Florida business it is an extension of who you are. From inception to the early stages to maturity, you have worked hard on your business. You may need legal help along the way, and getting things right is very important.

Our dedicated Jacksonville business lawyers and trusted legal counsel, Legacy Planning Law Group, know that the best way to help Jacksonville business owners understand their Florida business planning needs and ultimate goals.

If you’re interested in learning more about our Jacksonville business planning services, please book your free 15-minute phone call with us today! 904-880-5554

Business Plan

By ADAM HAYES

A business plan is a written document that describes in detail how a business—usually a startup—defines its objectives and how it is to go about achieving its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints.

Business plans are important documents used for the external audience as well as the internal audience of the company. For instance, a business plan is used to attract investment before a company has established a proven track record or to secure lending. They are also a good way for companies’ executive teams to be on the same page about strategic action items and to keep themselves on target towards the set goals.

Although they’re especially useful for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to see if goals have been met or have changed and evolved. Sometimes, a new business plan is created for an established business that has decided to move in a new direction.

KEY TAKEAWAYS

  • A business plan is a written document describing a company’s core business activities, objectives, and how it plans to achieve its goals.
  • Startup companies use business plans to get off the ground and attract outside investors.
  • Businesses may come up with a lengthier traditional business plan or a shorter lean startup business plan.
  • Good business plans should include an executive summary, products and services, marketing strategy and analysis, financial planning, and a budget.

A business plan is a fundamental document that any startup business needs to have in place prior to beginning operations. Banks and venture capital firms indeed often make writing a viable business plan a prerequisite before considering providing capital to new businesses.

Operating without a business plan is not usually a good idea. In fact, very few companies are able to last very long without one. There are definitely more benefits to creating and sticking to a good business plan—including being able to think through ideas without putting too much money into them and, ultimately, losing in the end.

A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. Business plans, even among competitors in the same industry, are rarely identical. But they all tend to have the same basic elements, including an executive summary of the business and a detailed description of the business, its services, and its products. It also states how the business intends to achieve its goals.

The plan should include at least an overview of the industry of which the business will be a part, and how it will distinguish itself from its potential competitors.

While it’s a good idea to give as much detail as possible, it’s also important to be sure the plan is concise so the reader will want to get to the end.

 

Elements of a Business Plan

The length of the business plan varies greatly from business-to-business. All of the information should fit into a 15- to 20-page document. If there are crucial elements of the business plan that take up a lot of space—such as applications for patents—they should be referenced in the main plan and included as appendices.

As mentioned above, no two business plans are the same. But they all have the same elements. Below are some of the common and key parts of a business plan.

  • Executive summary: This section outlines the company and includes the mission statement along with any information about the company’s leadership, employees, operations, and location.
  • Products and services: Here, the company can outline the products and services it will offer, and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology. Any information about research and development (R&D) can also be included here.
  • Market analysis: firm needs a good handle on the industry as well as its target market. It will outline who the competition is and how it factors in the industry, along with its strengths and weaknesses. It will also describe the expected consumer demand for what the business is selling and how easy or difficult it may be to grab market share from incumbents.
  • Marketing strategy: This area describes how the company will attract and keep its customer base and how it intends to reach the consumer. This means a clear distribution channel must be outlined. It will also spell out advertising and marketing campaign plans and through what types of media those campaigns will exist on.
  • Financial planning: In order to attract the party reading the business plan, the company should include its financial planning and future projections. Financial statements, balance sheets, and other financial information may be included for already-established businesses. New businesses will instead include targets and estimates for the first few years of the business and any potential investors.
  • Budget: Any good company needs to have a budget in place. This includes costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business.

Types of Business Plans

Business plans help companies identify their objectives and remain on track. They can help companies start and manage themselves, and to help grow after they’re up and running. They also act as a means to get people to work with and invest in the business.

Although there are no right or wrong business plans, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration, the traditional business plan is the most common. They are standard, with much more detail in each section. These tend to be much longer and require a lot more work.

Lean startup business plans, on the other hand, use an abbreviated structure, highlighting key elements. These business plans aren’t as common in the business world as they are short—as short as one page—and have very little detail. If a company uses this kind of plan, they should expect to provide more detail if an investor or lender requests it.1

Special Considerations

Financial Projections

A complete business plan must include a set of financial projections for the business. These forward-looking projected financial statements are often called pro-forma financial statements or simply the “pro-formas.” These statements include the overall budget, current and projected financing needs, a market analysis, and the company’s marketing strategy.

Other Considerations for a Business Plan

The idea behind putting together a business plan is to enable owners to have a more defined picture of potential costs and drawbacks to certain business decisions and to help them modify their structures accordingly before implementing these ideas. It also allows owners to project what type of financing is required to get their businesses up and running.

If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing. For example, Tesla Motors’ electric car business essentially began only as a business plan.

A business plan is not meant to be a static document. As the business grows and evolves, so too should the business plan. An annual review of the plan allows an entrepreneur to update it when taking markets into consideration. It also provides an opportunity to look back and see what has been achieved and what has not. Think of it as a living document that grows and evolves with your business.

Read more related articles at:

WHAT MAKES A GOOD BUSINESS PLAN?

Without Sound Financial Projections Your Business Plan Is Merely Conceptual

Also, read one of our previous Blogs at:

How To Create a Strong Succession Plan for Your Business

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

business succession planning

How To Create a Strong Succession Plan for Your Business

How To Create a Strong Succession Plan for Your Business

Are you thinking about retiring from business? Or maybe your business is finally going well and you want to make sure it continues the way you want it to. Business succession planning can help you establish the next line of leadership, maintain continuity, and preserve your wishes for your business into the future.

Key Takeaways

  • A succession plan is a general plan for continuity of a business in a change of ownership in planned or unexpected situations.
  • The goal of a succession plan is to keep the business running smoothly during and after a transition.
  • A major part of a succession plan is legal documents with language that guides transitions.
  • The best time to create a business succession plan is immediately and then update it often.

 

Why You Need a Business Succession Plan

A business succession plan isn’t a separate document that the owner puts together. It should be primarily part of your business’s legal structure and be included in the governing documents of your business from the get-go. Think of a succession plan not as just determining who will succeed you, but as a continuity plan, to be used in case of both planned transitions and unexpected disruption, like a public health or economic crisis.

The key pieces of your succession plan are:

  • Identify possible successors
  • Consider the value of your business and how to improve it
  • Include tax and estate planning
  • Anticipate uncertainty
  • Decide how to transfer ownership

 

Preparing for Your Succession Plan 

Begin your business succession planning by looking at the governing documents of your business and making changes to include your specific wishes for what happens if you no longer run the business.

If your business has several owners, like a partnership or limited liability company (LLC), you’ll need to make sure the governing documents take into account changes in the business structure if an owner leaves, dies, or is divorced.1

The specific governing documents for each type of business include:

A sole proprietorship has no governing document, which means you need to create a written record of your wishes for your business with the help of an attorney, as part of your overall personal estate planning. These documents might include a will or revocable trust.34

A succession plan and an exit strategy are slightly different. Both are plans to deal with planning for business changes, but an exit stegy focuses more on the decision to close or sell the business.

 

Choosing Your Successors  

The key to a business succession plan is to consider how you want the management and control of your business to look in the future.

In an email interview with The Balance, attorney Haley Ayure said that a complicated part of business succession planning is figuring out who should make the decisions in the future, and how to control that after you’re no longer involved with the business. This is tied to ownership and the governing documents because the owners typically vote to appoint directors, managers, and officers if they are not going to make business decisions themselves.

In a family business, for example, the ownership interests of a parent might pass to a child upon the parent’s death. Unless the governing documents say otherwise, the child might then have the ability to appoint themselves as the manager or officer.

 

What To Include in Your Plan 

The language in a partnership agreement delegates specific instructions on what to do in the event of a dispute, a termination, a death, or other life-changing scenarios. This language ensures that your wishes will be carried out regardless of circumstance.

In an email interview with The Balance, attorney Nance Schick explained that, when changes occur, a partnership agreement can be a great guiding document. A few examples may include:

  • A dispute resolution clause that could provide the steps necessary to resolve conflicts among partners
  • A termination clause that can provide the steps necessary for resignation or removal
  • Additional provisions that detail limitations on ownership by heirs or other outside parties, and what to do if a partner becomes disabled or dies

Without a clear, written agreement on such terms, business ownership can pass to multiple beneficiaries who may have no experience or interest in the business.

If you aren’t sure you need a business succession plan, consider that the cost of hiring a lawyer to draft good documents may be much less expensive than a legal battle with family or business partners in court.

 

How To Ensure a Strong Succession Plan 

Here are some other tips for creating a succession plan that will keep your business successful after you leave.

Decide Who Will Run the Business

Decide what role you want to play in your business during the transition and afterward. Do you want to remain in a position of authority, and if so, how long? Or maybe you want to leave a legacy by serving as a consultant or board member after you leave active management.

Run a Financial Checkup

One quick way to spot financial weaknesses is to run some financial ratios for your business and to analyze them in comparison to industry standards. Look especially at long-term indicators like solvency ratios that measure the ability of a company to pay its debts and liquidity.

Get a Business Valuation

business valuation will help you spot weaknesses and fix them. You will need to find an accredited business valuation appraiser for this task, to be sure they are following standards. Check the website of the American Society of Appraisers to search for an appraiser.

Review Company Policies

According to Ayure, reviewing company policies is important in making sure your succession plan does what you want it to. Prepare by setting your policies in place now. These may include setting criteria for positions and having job descriptions for key positions, up to and including CEO, board members, and managers, and setting policies for reviews and promotions.

Review and Update Your Plan

Creating a succession plan isn’t just a “one and done” proposition. Set up regular reviews of the plan to see what’s changed, both inside and outside your company. Tax laws change frequently, so you’ll need to consult a licensed tax professional and an attorney to make changes in documents.

 

Frequently Asked Questions (FAQs)

 

What is business succession insurance?

Business succession insurance isn’t available, but you can use life insurance to provide benefits to co-owners of a business. For example, a partnership or the partners can buy a life insurance policy on other partners (not themselves). If a partner dies, the policy pays death benefits to the business or the other partners. The proceeds then go to the insured’s family members or heirs, while the living partners continue to own the business.5

A business can also get a key person insurance policy on a business owner or key executive. This insurance protects the business if the insured dies unexpectedly. This type of insurance is very helpful in a small business that might have trouble surviving the death of a founder or owner.6

 

When does business succession planning need to be done?

Small business owners should do business succession all through the life of their business. A succession plan isn’t just for retirement, but for unexpected emergencies or just a general review of the business.

Create a succession plan as soon as possible and review it at least once a year. Consider changes in the economy, employment, taxes, and the legal landscape. Get a new business valuation every few years to make sure the value is up to date. Consider the changes in the structure of the business, and in the plans of the owner.

Read more related articles at:

What is business succession planning?

Why Your Company Needs a Succession Plan

Also, read one of our previous Blogs at:

Did Robert Redford Have a Business Exit Plan?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

business Plan

Business Succession Planning: 5 Ways to Transfer Ownership Of Your Business

Business Succession Planning: 5 Ways to Transfer Ownership Of Your Business

WRITTEN BY: Robert Newcomer-Dyer

Business succession planning is a series of logistical and financial decisions about who will take over your business upon retirement, death, or disability. To write a succession plan, the first step is to identify the ideal successor to take over the business, then determine the best selling arrangement. This usually involves a buy-sell agreement, secured with a life insurance policy or loan.

There are five common ways to transfer ownership of your business:

  1. Co-owner: Selling your shares or ownership interests to a co-owner.
  2. Heir: Passing ownership interests to a family member.
  3. Key employee: Selling your business to a key employee.
  4. Outside party: Selling your business to an entrepreneur outside your organization.
  5. Company: For a business with multiple owners, you can sell your ownership interests back to the company, then distribute them to the remaining owners.

How a Business Succession Plan Works

business succession plan is a document that is intended to guide through a change in ownership by providing step-by-step instructions. If a purchase is involved, the sale price and purchase terms are clearly outlined, relieving stress for the departing owner’s family. A well-crafted succession plan aims to benefit everybody—the departing owner, the business, employees, and the successor.

A small business succession plan should include the following:

  • A succession timeline: Details regarding the circumstances when a succession would take place and specific dates as applicable.
  • Your potential successors: A list of potential successors, including strengths and order of consideration.
  • Formalized standard operating procedures (SOPS): A collection of documents, procedures, employee handbooks, and training documentation.
  • Your business’s valuation: The valuation of your business should include the method by which is valued and be updated frequently.
  • How your succession will be funded: Details including whether the succession is funded through life insurance, a seller’s note, or other funding options.

Who Should Create a Business Succession Plan

Succession plans are commonly associated with retirement; however, they serve an important function earlier in the business lifespan: If anything unexpected happens to you or a co-owner, a succession plan can help reduce headaches, drama, and monetary loss. As the complexity of the business and the number of people impacted by the exit grows, so does the need for a well-written succession plan.

You should consider creating a succession plan if you:

  • Have complex processes: How will your employees and successor know how to operate the business once you exit? How will you duplicate your subject matter expertise?
  • Employ more than just yourself: Who will step in to lead employees, administer human resources (HR) and payroll, and choose a successor and leadership structure?
  • Have repeat clients and ongoing contracts: Where will clients go after your exit, and who will maintain relationships and deliver on long-term contracts?
  • Have a successor in mind: How did you arrive at this decision, and are they aware and willing to take ownership?

Many business owners ignore succession planning because they don’t believe it’s necessary or put it off until they’re ready to retire. For small, simple businesses, a succession plan may not be necessary. However, consider what would happen to your business if you were no longer able to run the day-to-day operations. Who would take over? Would the business be viable?

When to Create a Small Business Succession Plan

Every business needs a succession plan to ensure that operations continue, and clients don’t experience a disruption in service. If you don’t already have a succession plan in place for your small business, this is something you should put together as soon as possible.

While you may not plan to leave your business, unplanned exits do happen. In general, the closer a business owner gets to retirement age, the more urgent the need for a plan. Business owners should write a succession plan when a transfer of ownership is in sight, including when they intend to list their business for sale, retire, or transfer ownership of the business. This will ensure the business operates smoothly throughout the transition.

The 5 Common Types of Succession Plans

There are several scenarios in which a business can change ownership. The type of succession plan you create may depend on a specific scenario. You may also wish to create a succession plan that addresses the unexpected, such as illness, accident, or death, in which case you should consider whether to include more than one potential successor.

Here are the five most common types of small business succession plans in detail.

1. Selling Your Business to a Co-owner

If you founded your business with a partner or partners, you may be considering your co-owners as potential successors. Many partnerships draft a mutual agreement that, in the event of one owner’s untimely death or disability, the remaining owners will agree to purchase their business interests from their next of kin.

This type of agreement can help ease the burden of an unexpected transition—for the business and family members alike. A spouse might be interested in keeping their shares but may not have the time investment or experience to help it blossom. A buy-sell agreement ensures they’re given fair compensation, and allows the remaining co-owners to maintain control of the business.

Potential Drawbacks

A buy-sell agreement with a co-owner requires a lot of cash kept on-hand. Your co-owner should be prepared to buy-out your shares, theoretically, at any moment. Many businesses will fund this plan with life insurance. Term life insurance is relatively inexpensive and can offset a lot of costs in the event of an owner’s death. Permanent life insurance is a bit more expensive with the added benefit of a payout in the event of retirement or disability.

If you choose to draft a buy-sell agreement with your co-owner, you’ll want to make sure a life insurance policy is stipulated in the agreement. The company can also purchase key person insurance that pays out in the event a key member of the business dies or becomes disabled. We recommend speaking with an expert for specific help on the type of policy you’ll need.

2. Passing Your Business Onto an Heir

Choosing an heir as your successor is a popular option for business owners, especially those with children or family members working in their organization. It is regarded as an attractive option for providing for your family by handing them the reins to a successful, fully operational enterprise. Passing your business on to an heir is not without its complications.

Some steps you can take to pass your business onto an heir smoothly are:

  • Determine who will take over: This is an easy decision if you already have a single-family member involved in the business but gets more complicated when multiple family members are interested in taking over.
  • Provide clear instructions: Include instructions on who will take over and how other heirs will be compensated.
  • Consider a buy-sell agreement: Many succession plans include a buy-sell agreement that allows heirs that are not active in the business to sell their shares to those who are.
  • Determine future leadership structure: In businesses where many heirs are involved, and only one will take over, you can simplify future discussions by providing clear instructions on how the structure should look moving forward.

Failing to address these steps may lead to a chaotic transition. For example, if a future leadership structure is not implemented, and the business passes on to more than one heir, the resulting power struggle may negatively impact the business. Alternatively, each heir may incorrectly assume the other will take over day-to-day responsibilities.

Before instructions can be given on who will take over leadership of the business, a future leader should be chosen. This is likely to be complicated when more than one heir is interested in taking over. Business owners can reference current business contributions and responsibilities from potential heirs to assist in choosing a successor.

Potential Drawbacks

Making business decisions within a family can get messy. Emotions can run high, especially after an untimely death or disability. Further, second-generation businesses rarely survive the transition, as they’re often sold by the inheriting family member, or fail outright.Only about 30 %  keep the same name and ownership following an inheritance.

Altogether, this should beg the question; is inheritance even the best idea? If your successor is skilled and business savvy, then perhaps the answer is “yes.” If not, you may consider selling your business to a co-owner, key employee, or outside buyer instead.

3. Selling Your Business to a Key Employee

When you don’t have a co-owner or family member to entrust with your business, a key employee might be the right successor. Consider employees who are experienced, business-savvy, and respected by your staff, which can ease the transition. Your org chart can help with this. If you’re concerned about maintaining quality after your departure, a key employee is generally more reliable than an outside buyer.

Just like selling to a co-owner, a key employee succession plan requires a buy-sell agreement. Your employee will agree to purchase your business at a predetermined retirement date, or in the event of death, disability, or other circumstance that renders you unable to manage the business.

Potential Drawbacks

A common drawback to key employee succession is money. Most employees aren’t in the financial position to buy the business they work for. Even if they are, having enough liquid cash on hand is another challenge.

One solution is seller financing, in which your employee pays you (or your family) back over time. There’s typically a down payment of 10% or higher, then monthly or quarterly payments with interest until the purchase is paid for in full. The exact terms of the loan will need to be negotiated and then laid out clearly in your succession plan.

4. Selling Your Business to an Outside Party

When there isn’t an obvious successor to take over, business owners may look to the community: Is there another entrepreneur, or even a competitor, that would purchase your business? To ensure that the business is sold for the proper amount, you will want to calculate the business value properly, and that the valuation is updated frequently.

This is easier for some types of businesses than others. If you own a more turnkey operation, like a restaurant with a good general manager, your task is simply to demonstrate that it’s a good investment. They won’t have to get their hands dirty unless they want to and will ideally still have time to focus on their other business interests.

Meanwhile, if you own a real estate company that’s branded under your own name, selling could potentially be more challenging. Buyers will recognize the need to rebrand and remarket and, as a result, may not be willing to pay full price.

Instead, you should prepare your business for sale well in advance; hire and train a great general manager, formalize your operating procedures, and get all your finances in check. Make your business as stable and turnkey as possible, so it’s more attractive and valuable to outside buyers.

Potential Drawbacks

One of the main drawbacks to an outside sale succession plan is the unexpected: It’s nearly impossible to predict exactly what the sales process will have in store. The process of selling a business to an outside party is complex and could encounter roadblocks like: your business not being as valuable as you anticipated, lack of credible buyers, your business not being able to sell at all, and more. Business brokers, like VNB Business Brokers, are experienced and well-versed in all aspects of selling and purchasing businesses on their clients’ behalf.

Consider outsourcing to a business broker so that you can focus on running your business and maintaining its value while professionals handle the sale. In addition to taking care of potential problems, VNB will ensure all steps of the process including finding and vetting buyers, structuring your deal, preparing documents, and negotiating terms. After one quick call, VNB Business Brokers will be able to tell you things like: what your business is worth, if the valuation price can be increased and how long it will take to sell your business.

 

5. Selling Your Shares Back to the Company

The fifth option is available to businesses with multiple owners. An “entity purchase plan” or a “stock redemption plan” is an arrangement where the business purchases life insurance on each of the co-owners. When one owner dies, the business uses the life insurance proceeds to purchase the business interest from the deceased owner’s estate, thus giving each surviving owners a larger share of the business.

Potential Drawbacks

An entity purchase is similar to a cross-purchase, in which you sell your shares to a co-owner or co-owners. In most circumstances, a cross-purchase is more financially viable. When co-owners purchase shares directly, they get a “step-up in basis,” which means the stock’s basis is revalued at its current price. With an entity purchase, the original basis remains, and your co-owners will be liable for potentially higher capital gains.

Despite this drawback, entity purchases can still be beneficial when you have a large number of co-owners. Drafting cross-purchase agreements with each owner can be cumbersome. An entity purchase agreement, in comparison, is much simpler to implement. It can typically be funded with a single life insurance policy for each co-owner.

How to Create a Succession Plan

There are several key steps necessary to create a comprehensive small business succession plan, and several ways to go about creating your plan. Some business owners may choose to create their own succession plan, while others may wish to engage the help of a professional, depending on the complexity of the plan and the business.

Whether you create your plan yourself or engage a professional, the five steps to writing a succession plan are:

  • Determining timeline: Define when the succession should take place, either on a predetermined date or in the event of death or disability.
  • Choosing your successor: If this is not a purchase by a specific party, consider choosing three or more potential candidates, filling out a profile for each.
  • Formalizing your standard operating procedures: Document your standard operating procedures (SOPs), including an organizational chart, employee handbook, operations manual, and any other recurring meetings or processes.
  • Valuing your business: Several methods exist to value your business. Once you have calculated your business’s value, it should be updated frequently.
  • Funding your succession plan: Define a specific path that lays out how the successor will purchase the business. Options include life insurance, loan, and seller financing.

Read more related articles at:

Your Business Needs a Succession Plan: Here Are the Basics

Strategic Business Plans: Why This Success-Focused Tool Is A Must-Have

Also, read one of our previous Blogs at:

Does My Business Need a Succession Plan?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

LLC for Estate Planning

Should I Create an LLC for Estate Planning?

Should I Create an LLC for Estate Planning?

If you want to transfer assets to your children, grandchildren or other family members but are worried about gift taxes or the weight of estate taxes your beneficiaries will owe upon your death, a LLC can help you control and protect assets during your lifetime, keep assets in the family and lessen taxes owed by you or your family members.

Investopedia’s article entitled “Using an LLC for Estate Planning” explains that a LLC is a legal entity in which its owners (called members) are protected from personal liability in case of debt, lawsuit, or other claims. This shields a member’s personal assets, like a home, automobile, personal bank account or investments.

Creating a family LLC with your children lets you effectively reduce the estate taxes your children would be required to pay on their inheritance. A LLC also lets you distribute that inheritance to your children during your lifetime, without as much in gift taxes. You can also have the ability to maintain control over your assets.

In a family LLC, the parents maintain management of the LLC, and the children or grandchildren hold shares in the LLC’s assets. However, they don’t have management or voting rights. This lets the parents purchase, sell, trade, or distribute the LLC’s assets, while the other members are restricted in their ability to sell their LLC shares, withdraw from the company, or transfer their membership in the company. Therefore, the parents keep control over the assets and can protect them from financial decisions made by younger members. Gifts of shares to younger members do come with gift taxes. However, there are significant tax benefits that let you give more, and lower the value of your estate.

As far as tax benefits, if you’re the manager of the LLC, and your children are non-managing members, the value of units transferred to them can be discounted quite steeply—frequently up to 40% of their market value—based on the fact that without management rights, LLC units become less marketable.

Your children can now get an advance on their inheritance, but at a lower tax burden than they otherwise would’ve had to pay on their personal income taxes. The overall value of your estate is reduced, which means that there is an eventual lower estate tax when you die. The ability to discount the value of units transferred to your children, also permits you to give them gifts of discounted LLC units. That lets you to gift beyond the current $15,000 gift limit, without having to pay a gift tax.

You can give significant gifts without gift taxes, and at the same time reduce the value of your estate and lower the eventual estate tax your heirs will face.

Speak to an experienced estate planning attorney about a family LLC, since estate planning is already complex. LLC planning can be even more complex and subject you to heightened IRS scrutiny. The regulations governing LLCs vary from state to state and evolve over time. In short, a family LLC is certainly not for everyone and it appropriately should be vetted thoroughly before creating one.

Reference: Investopedia (Oct. 25, 2019) “Using an LLC for Estate Planning”

Read more related articles at: 

How Limited Liability Companies Can Help with Estate Planning

LLC: The Estate Planning Tool

Also, read one of our previous Blogs at :

Small Business Owners Need Business Succession and Estate Planning

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