Family Business
Protecting Small Family Businesses
At Legacy APC, we understand what it means to be a business owner, parent, and provider. In fact, we have a long history of entrepreneurship and our values reflect our commitment to preserving generational wealth by creating effective transitions from one generation to the next.
Unfortunately, the majority of family businesses are unable to survive the transfer to the next generation.
The reason is primarily due to a lack of planning against excessive taxes and probate fees, but there are also many ways a business can be threatened and lost during the owner’s lifetime, such as through an accident or lawsuit.
Planning Goals for your Business
Most business owners want to accomplish three things:
- Preserving the business so it passes intact to the next generation
- Distributing the business to their beneficiaries equitably and fairly
- Protecting the business assets from lawsuits and other claims
With the right legal approach, it’s possible to do all those things successfully.
Business Risks Your Family May Face
Most businesses have valuable assets, whether it’s real estate, land, product inventory, or brand names that are at risk of being lost without proper protective strategies.
The most significant risks a business faces during the owner’s lifetime include:
When the Business Owner Needs Long-Term Care:
If a business owner is injured or in an accident and needs to be placed in a long-term care facility, this could spell the end for the business. Long-term care expenses are costly in California, ranging from $63,000 for assisted living to $146,000 for nursing home care each year. Between not having you there to manage your business and the drain of the rising cost of care, you could be forced to liquidate your business assets to pay for your healthcare needs. In the event of your incapacity, failing to have a succession plan could lead to your business losing its value, even if it doesn’t have to be liquidated.
Lawsuits:
We live in a litigious society, and the risk of a business being sued is high. In the U.S., 12 million lawsuits against small businesses are filed annually.
Large corporations may have the capital to survive the significant costs of litigation, but for small businesses, being sued could be their demise. From a customer having an accident in your establishment to your business being underinsured, you can find yourself in deep trouble with legal issues.
In a worst-case scenario, a lien could be placed on your assets to enforce a judgment, and in a best-case scenario, you prevail but still have to pay for the high cost of litigation.
With the right strategy, we can shield your assets from being exposed in a lawsuit, protecting your business and livelihood during your lifetime and for the benefit of the next generation.
Protecting Your Family Business
The key protective strategies for the majority of family businesses may include one or all of the tools listed below. At Legacy APC, we pride ourselves on simplifying the complex and will facilitate the planning and transition of your business to future generations.
We may discuss how to:
Create a Buy/Sell Agreement.
A buy/sell agreement will prevent someone you don't want in the business from acquiring ownership shares and ensure that those you do want in the business will inherit the right to do so.
Succession Planning.
Succession planning includes designating successors in your family as managers and owners of the business. It may also include specific roles for both active and non-active family members. Additionally, we’ll help you put an emergency action plan together in case of an incapacitating event—so the business can continue as usual.
Incorporate Your Business.
So it is treated as a separate legal entity and the assets you own personally won't be lost due to any challenges in the business, we’ll assist you in incorporating your business.
Create Trusts.
Protect your business from long-term care expenses, estate taxes, and mismanagement by structuring the ownership of your business into trusts.
Powers of Attorney.
We’ll help you set up your powers of attorney, so someone you choose can make financial and healthcare decisions on your behalf if you become incapacitated.
A Multi-Disciplinary, Collaborative Approach
Most businesses have a team of professional advisors including a CPA or accountant, a financial planner, and a corporate counsel. All of these advisors’ roles intersect with various components of creating an effective estate and business succession plan.
At Legacy APC, our goal is to enable you to focus on your business rather than on the administrative details of business succession planning. We help coordinate advisors when needed, hold roundtables, and set up family meetings to ensure everyone is in the same boat and rowing in the same direction.
Our experienced attorneys at Legacy APC are here to discuss the best business and asset protection strategies for your needs. Schedule your free consultation or call our office (619) 696-0778 today to learn more.
