Business Planning ensures your business goals are met during all phases of your business, from start-up to yearly maintenance and ending with your succession plan.
If you want to take care of business even after you’re gone, whether you want to sell it or keep it in the family, you’ll need to plan for what will happen to your estate and your business.
Communication with your family and business partners is the first step. The second is making sure you have the proper legal instructions and funding that coordinate with your overall estate plan.
LLC – Limited Liability Company
The LLC is a hybrid business structure designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. LLCs are a popular choice for sole proprietors who want an easy and inexpensive form of ownership. For multi-member organizations, LLCs offer maximum asset protection and flexibility for taxation, offering partnership, S Corp, and C Corp options. The Limited Liability Company (LLC) is now a recognized business structure in all 50 states, including the District of Columbia.
Main Advantages of Forming an LLC
Owners of an LLC have limited liability for business debts. For tax purposes, the allocation of profit and loss of an LLC need not be proportional to ownership interests. With an LLC, there is no double taxation threat, since the LLC is not a separate taxable entity. You do not need to be a US citizen to own or invest in an LLC. LLCs allow their owners to enjoy the tax advantages of partnerships and sole proprietorships while having the limited liability protection associated with corporations.
A “C” Corporation (or simply a Corporation) is considered by law to be a unique entity separate from those that own it. As an individual entity, a corporation can be taxed and sued and can enter into contractual agreements. Corporations are owned by shareholders of the corporation, who elect a board of directors to oversee the major decisions and policies. The board of directors is usually responsible for appointing the various officers of the corporation. If at any point the ownership of the corporation changes due to either a transfer of a shareholder’s shares or the death of a shareholder, the corporation does not dissolve.
Main Advantages of Forming a C Corporation
The major advantage of a “C” Corporation is the limited personal liability that owners have for the debts of the business. If a corporation is sued and the creditor is successful in obtaining a judgment, a shareholder can lose no more than their investment in the corporation. corporations can generally deduct the cost of benefits as a business expense and can split corporate profits among owners and the corporation, paying a lower overall tax rate. There is no limit on the number of stockholders or who may be a stockholder. “C” Corporations, however, are subject to double taxation, both at the corporate level and when distributions are made to the shareholders. If requirements are met, a corporation can choose “S” Corporation status, enabling them to avoid double taxation.
A subchapter “S” Corporation, also called an “S” Corporation, is formed and managed in a similar manner to the “C” Corporation. However, an “S” Corporation, by electing a special tax status, can avoid the double taxation normally associated with a “C” Corporation. The subchapter S tax election makes the Corporation a “pass through” entity whereby all earnings and profits of the Corporation flow through the Corporation to the owners are only taxed at the owners’ tax rate.
Main Advantages of Forming an S Corporation
Like a “C” Corporation, owners of an “S” Corporation have limited personal liability for business debts and can lose no more than they have invested. S corporations are “pass through” entities and avoid double taxation. With an “S” Corporation, owners can use corporate losses to offset income from other sources. Owners of an S Corporation can save on employment taxes (Social Security and Medicare taxes) by taking distributions instead of salary.
What if I already own a business?
Business Succession & Exit Planning is an important component of business planning that should not be overlooked. We like to compare leaving your business successfully to winning a car race. All race plans include careful preparation of the car, driver skill and experience, crew skill and a well-conceived race strategy. Business owners win their ultimate race when they leave their companies on their terms and on their schedules. The process owners use to achieve this victory is known as Exit Planning. In short, Exit Planning is the deliberate, adaptable, and customized process that a business owner uses so that he (or she) can leave his business on his terms and on his schedule. An exit plan can help maximize your financial return when you transfer your business while minimizing your tax liability. Even if retirement is a long way off, understanding the process now can help you run your business in a way that will make it easier to leave when you are ready. If you become disabled or die before retirement, exit planning can help ensure your business survives and your family receives its full value.
Why do I need a Buy-Sell Agreement?
The average business owner spends 10 hours per day, six days per week to get their business to the point where it can provide a measure of security for their family. When the business is owned by partners, all those hours of work can go to waste if they fail to establish a plan in the event one of them suffers an untimely disability or death. Only by planning ahead can the survivor be assured of a smooth transition. A Buy-Sell is an agreement between the owners of a business which details what happens in the event of the disability or death of one of the owners. Such agreements can also deal with the situation where one of the owners becomes disabled, retires, divorces, or wishes to sell their interest in the business. Typically, the Buy-Sell Agreement provides for the purchase of a deceased owner’s interest at the time of death for a pre-determined or calculated purchase price. This ensures the deceased’s family receives full value for the business interest on fair terms. Ideally, the purchase price will be funded with the purchase of a life insurance policy so the business can continue to run profitably, even after the loss of a key business owner.
Guardian Advocacy and Guardianship Process
Call our office to schedule a brief complimentary telephone conference with one of our attorneys to discuss your business matter.
One hour one-on-one consultation to review and discuss in detail your business matter. (Consultation Fee $350.00)
and Planning, and Mediation.