You have worked hard to build a successful business; have you considered what will happen when you decide to retire, or if you became incapacitated or died? Often, small business owners do not plan for the continuation of the business after they are gone. If you want to ensure that the business continues and that its assets go where you want them to go, some advance planning is necessary.
Choice of Business Entity
Planning for the continuation of your business can start at the very beginning when you choose how to set it up. There are several options for business entity formation, each with advantages and disadvantages. Some of the choices are:
Sole proprietorship – A sole proprietorship is basically just you doing your business. You may have a trade name, but taxes and payments are in your name. Taxes are simple, but personal liability could be an issue, especially if you employ any other people. When you retire, the business ends, your heirs will inherit any assets of the business.
Limited Liability Company (LLC) – An LLC is a separate legal entity, but if you are the only member, the company will not survive your retirement or death. Your heirs will inherit the assets of the business. An LLC may have several members, and an operation agreement will set forth what will happen if a member leaves the business. Many law firms, like Reid Goodwin Law, are set up as LLCs or variations of LLCs, so individual attorneys can come and go while the firm carries on.
Corporation – A corporation is also a separate legal entity, and provides the most protection for you if the business is sued. After your death, your shares in the company will pass to your heirs, but the company will continue to exist. If you decide to retire, you may sell your shares to another person, and the company will continue with its new owner.
You may start as a sole proprietor and change to another type of business entity as your business grows. A local attorney and/or accountant will be able to advise you on the legal and tax consequences of the various types of business entities.
Even if your business is a one-person operation, the business may have physical assets, accounts receivable, and outstanding debts when you die. You may want to pass the business on to a child, business partner, or another person. You may do business in multiple states, but the law of the state in which your business entity is formed, or the state in which you live, will govern who inherits assets and liabilities.
Talk to an estate planning attorney in your state about how to ensure that you control what happens to your business. You can find Tustin Ca estate planning lawyers here, for example.
A Business By Any Other Name
Something as basic as the name you choose for your business may have an impact on the success of the enterprise after you leave. With an effective program of SEO marketing for small businesses , you can establish your brand as the first item that appears when a potential customer searches for the product or service you offer. If the business name is your name, you may want it to change after you retire. Changing the name, though, might undo some of the work you have done to establish your brand. Before you embark on a marketing plan, consider your choice of business name and if the name will stay the same after you leave.