Having an estate plan in place in the event of an untimely death can be an excellent method of protecting a personal business. You don’t want to have worked for a lifetime only to lose a personal business that could be a family legacy and livelihood for generations to come. There are financial tools available that allow business owners to set their business aside in an overall personal asset portfolio that is designated for assignment in the event of an unexpected passing. The two best methods of protecting a business are either putting them in a trust or establishing a limited liability company that is a separate financial entity from the owner.
Benefits of an LLC
There are multiple benefits of establishing a business as a limited liability company, or LLC. They are essentially a pass-through financial entity that also can hold assets without necessarily having tax obligations. This designation is essential to understand when estate planning to protect financial assets. Additionally, owners are not required to assume the debts and liabilities of the company, which serves as a protection tool for personal wealth.
Another goal that a business owner may have is ensuring that transfer of the company happens per their wishes in the event of a death. This can be accomplished with an estate plan that also includes an LLC in the distribution portfolio upon passing. Families often are surprised in a probate process where a decedent’s business could be claimed by a creditor or in a tax assessment.
These are just a couple of reasons why establishing an LLC may be the right step to take for any California business owner. It is always best to be prepared for what may happen in the future with any business.