Owning your own business can be deeply satisfying, but it also takes a toll on your time and energy. You don’t have a “day off” anymore; you’re constantly building and growing your company for the benefit of your loved ones. In many ways, you ARE the business—the company’s day-to-day operations wouldn’t be the same without you. So, what happens to the company’s health if yours takes a turn for the worse?
Without the right documentation in your estate plan, your business and all its assets could:
Fortunately, owners have a variety of business succession tools at their disposal to make sure their company survives even when they are no longer at the helm.
How Your Business Structure Affects Your Florida Company and Your Heirs After Your Death
Several factors play into what happens to a Florida business after your death. The most common include the type of business entity, your succession plan, and whether you have a Will or Trust. It’s vital to leave no stone unturned when it comes to these documents, as minor mistakes can lead to enormous losses.
What Happens to a Sole Proprietorship When the Owner Dies?
A sole proprietorship is a business structure used for a single operator. You and your business are the same entity under Florida law, so when you die, the business dies too. There are no formalities to opening a sole proprietorship either. Your business assets are combined with your personal estate, and your beneficiaries will receive whatever’s left after your business and personal debts are paid.
What Happens to a Business Partnership When One Owner Dies?
Partnerships allow two or more people to manage a company, sharing the work responsibilities and the profits. This entity may offer tax benefits and limited liability depending on the nature of the business.
As part of its operating agreement, a partnership should have clear instructions for what will happen if one partner leaves the business. If you don’t have a legal agreement allowing your partners to continue operations or sell your business interests, the partnership will be dissolved.
What Happens to an LLC When the Owner Dies?
A limited liability company (LLC) allows people in Florida to maintain a legal separation between their business and personal assets. Its primary function is to prevent business owners from losing their homes or personal possessions to pay for their company’s debts or lawsuit damages. However, if the LLC doesn’t have an operating agreement, it could be dissolved upon your death and its assets distributed according to Florida intestacy laws. The challenge is that Florida’s Revised Limited Liability Company statute stands in as an operating agreement for those LLCs that elect not to create one of their own.
What Happens to an S Corp When the Owner Dies?
Unlike other business entities, corporations automatically survive the owner(s) death. If one owner dies, their shares in the company automatically become part of their estate. If the decedent had a Will, their stake in the company could be passed on to a trusted successor or sold to remaining partners for the benefit of their heirs. If there is no Will, company shares are distributed to the nearest relative according to Florida intestacy laws.
If I’ve said it once, I’ve said it 1000 times – being an S Corp is a tax election and not an entity structure. Your LLC, professional association, professional corporation, or regular corporation can be taxed as an S Corp. There are restrictions on S Corp ownership that can be pitfalls for the unwary, even if you’ve had an estate plan written!
Adding Business Succession to Your Florida Estate Plan
One of the easiest ways to keep your family, beneficiaries, and business partners out of litigation is with a comprehensive operating agreement. At Yolofsky Law, we help owners and shareholders create a rock-solid foundation for their companies, including an action plan in case of death, incapacity, disability, bankruptcy, or divorce.
Our succession planning services include:
Let Us Help Your Business Strategy and Florida Estate Plan Work Together
Yolofsky Law provides careful and detailed business strategy planning tailored to the individual needs of our clients. Our unique problem-solving methods have helped countless business owners accomplish their goals and give them the peace of mind they deserve. Schedule an intro call or email us at hello@yolofskylaw.com with us today to learn more about your options.
