Small businesses present a particular challenge to Florida Estate Planners. First off, businesses can operate in a wide variety of entities. Secondly, they may be more valuable being carried on than simply liquidated and distributed. Finally, businesses owned by more than one person must consider what happens if one of those owners died or became incapacitated.
Types of Businesses
Florida has a wide variety of ways of carrying on a businesses. There are sole proprietorships where an individual does business under their own name, or sometimes a d/b/a. Their are partnerships, where more than one person operate a business together. These can be both general and limited partnerships. There are corporations which are registered with the state and offer the owners liability protection. And finally, there are limited liability companies that contain certain elements of all of the above business forms.
Each one of these types of businesses has different methods of being owned. With sole proprietorships, the individual owns the business assets, including bank accounts, in their own name and these assets can be owned and disposed of just like their other assets. With partnerships, ownership is often defined in the partnership agreement. However, it is possible for a partnership to be without such an agreement, or for the agreement not to touch on what happens when one of the partners dies or becomes incapacitated. Corporations are owned by shares in the corporation identified by stock certificates. And, limited liability companies are owned in membership interests.
It does not matter in which state these businesses is held. Business interest and assets are all considered personal property and for Florida Residents, these interests will be administered in Florida Probate Courts regardless of where the business is formed. Real property is one possible exception, but only for sole proprietorships and some types of partnerships.
Each one of these business ownership interests is transferred differently. It is therefore very important to discuss these matters with a qualified Florida Estate Planning Attorney to be sure the business will not be wasted or destroyed while being administered in the event the owner dies or becomes incapacitated.
Carrying On
Another important consideration when owning a business as a Florida Resident, is how will the business carry on if something happens to one of the key members of the business? As part of planning for the future of your business, it’s very important to understand who has unique skills, knowledge or relationships that are key to the success of your business. No one is immortal or immune from illness, and therefore it’s important to have plans in place to address the loss of any key personnel, including yourself.
If, on the other hand, you are the business as is often the case in personal service businesses like small law firms, dental practices, handyman services, etc.; it’s necessary to plan for the loss of income, and recovering the assets of this business. Life insurance, and key person insurance are common tools for addressing these types of concerns.
Ownership with Partner’s Family Members
Lastly, if you are not the only owner of a business, it’s also necessary to examine who would end up owning the business if one of your partners or co-owners died or became incapacitated. Without proper planning, you could easily find yourself in business with your partner’s husband, wife, children, or guardian. It’s tough enough trying to run a business with people you’ve chosen. Imagine trying to run one with people you’ve not chosen to go into business with, and who may have no idea how your business runs. This, again, can be easily managed with advanced planning like a simple Buy-Sell Agreement.
Conclusion
Nothing can eliminate all problems when a business owner or key person dies or becomes incapacitated, but proper planning can reduce the negative impact and allow the business to continue to support the people that have come to rely on that business and its income.
