Is Your Estate Plan Created to Protect Your Business?

Are you a business owner? We know as a business owner that you have invested significant time, effort, and resources into building and growing your company. And, it is important to be sure that your hard work and the value of your business is protected and continues to thrive, even after you have passed away.  Although creating a Texas last will and testament is an important aspect of Texas estate planning, it may not be enough to entirely safeguard your business and create the legacy you want to leave for the future. In our Texas estate planning law firm, we work with business owners every day and want to provide you with insight into the limitations of relying solely on a will to protect your business as well as discuss alternative strategies that can provide more comprehensive protection.

To begin, let’s discuss the limitations of having only a Texas last will and testament for business protection. A will is a legal document that outlines how your assets, including your business, should be distributed after your passing. There are, however, several reasons why a will may fall short when it comes to protecting your business including, but not limited to, any of the following:

• There may be delays in probate. Like any other asset, when your business is included in your Texas last will and testament it must go through the probate process. Probate can be a time-consuming and costly affair, and it can also potentially lead to operational disruptions and financial strain on your business.
• There may be concerns in regard to business continuity. Should your business go to probate, your business’s day-to-day operations may be put on hold until the courts settle the distribution of assets. Without proper planning, this pause could impact your business’s continuity, leading to potential revenue loss and instability.
• There may be a lack of a business management plan. Your will does not provide instructions on how your business should be managed in your absence. Without clear guidance, disputes among beneficiaries or uncertainty about leadership could arise, potentially harming the business’s performance and reputation.

Is there anything you can do?  Yes, to protect your business effectively, it is critical to incorporate business succession planning into your estate planning strategy with your Texas estate planning attorney. With business succession planning you will develop a comprehensive roadmap for the future of your business and address key issues such as leadership transition, asset distribution, and business continuity. 

When working with your Texas estate planning attorney, he will help you begin by identifying successors. In other words, you can designate individuals who will take over the leadership and ownership of the business. This could be family members, key employees, or external buyers. You can also create and start building a buy-sell agreement that establishes clear terms for the transfer of business ownership in case of your retirement, disability, or passing. This ensures a smooth transition and minimizes potential conflicts among stakeholders. Your Texas estate planning attorney may also recommend that you consider life insurance policies to fund the buy-sell agreement, providing the necessary funds to facilitate a seamless transfer of business ownership.

Most importantly, your Texas estate planning attorney may recommend that you employ trust agreements and legal entities specifically designed for businesses that can provide additional protection and benefits, such as:

• Revocable Trusts. A revocable trust can hold your business assets, allowing for the swift and private transfer of ownership without going through probate.
• Family Limited Partnerships (FLPs). FLPs are effective tools for managing and protecting family-owned businesses. They allow you to maintain control while gradually transferring ownership to the next generation, while also offering potential tax benefits.
• Limited Liability Company (LLC). Structuring your business as an LLC may be able to provide liability protection for owners and help safeguard personal assets from business-related debts and legal issues. Your Texas estate planning attorney can walk you through the pros and cons of this planning.

It is a fact that a will is a crucial component of Texas estate planning but it may not provide the comprehensive protection your business needs to thrive in the future. Incorporating business succession planning and utilizing trusts and entities specifically tailored to businesses can significantly enhance the protection of your business and ensure its continuity after your passing. 

We know this blog may raise more questions than it answers and we want to answer them. We strive to bring families closer and make businesses stronger through legal planning. Attorney Gerald Winters is proud to serve the community of Round Rock, Texas, and the Greater Austin area in Estate Planning, Probate and Estate Administration, Elder Law, Business Consulting, and Tax Planning. Whether you run a small business or a nonprofit or are an individual looking to improve your financial security, Gerald Winters is here to help you create a customized plan for your future. We encourage you to contact us today.