How Are My Business Documents Relevant to My Estate Plan?
Studies consistently find that only about 25–35 percent of Americans have an estate plan, a shockingly low rate when you consider that, in the absence of a plan, the state—not you or your family—decides what happens to your assets, including your business interests.
The overall business succession planning rate is higher, with about two-thirds of business owners having a succession plan in place, according to a recent Edward Jones survey.[1]
The planning rate is lower, however, for family businesses. PWC’s Family Business Survey found that fewer than one-third of family businesses have a formal succession plan.[2]
For most business owners, their company is the most valuable thing they own. Yet more than one-third of all business owners do not have a legally binding plan in place addressing how their business ownership interests should be transferred. Many have not taken the most basic succession planning steps, such as valuing their business. Those who have incorporated their business into their estate plan often have outdated plans or gaps within their plan, which could lead to unintended consequences. Business owners should have an up-to-date estate plan that aligns not only with their succession plan but also with the business’s governing documents.
Company rules about transferring business interests are found within documents such as a limited liability company (LLC) operating agreement, a partnership agreement, corporate bylaws, a shareholder agreement, or a buy-sell agreement. To help a client properly plan for the future transfer of ownership of their business, an estate planning attorney must review these documents.