You Can Transfer Your Ownership Interest In The Family Business To The Next Generation Outside Of Probate
The limited liability company (LLC) is an increasingly popular type of business structure. It offers a lower tax burden for its owners, and the company can have as many or as few partners as you choose; the partners can be people or companies. The biggest reason for the popularity of the LLC business structure, though, is that it protects its owners from being personally liable for debts owed by the LLC or judgments against it; in other words, creditors and courts cannot require you to use your own personal money to fix the LLC’s problems. To start an LLC, you must draft an operating agreement which specifies, among other things, the procedure for adding new partners or for a partner to transfer their ownership interest to someone else. Very well, but is an estate planning blog the place to discuss the relative merits of the LLC as compared to other types of business entities? The operating agreement of an LLC can be an important part of an estate planning document if you want certain members of your family to inherit your ownership interest in the LLC after you die. To find out more about the best way to make your business interests pass directly to your children or other family members, contact a Hillsborough County estate planning lawyer.
Man Makes Two Contradictory Plans for His Share of the Family Business
In 2009, Bertram and his sister Linda established an LLC in New Jersey, even though Bertram was a resident of Florida. The operating agreement of the LLC said that Bertram owned 50 percent of the company and Linda owned the other 50 percent. It stated that, when a partner in the LLC dies, his or her ownership share passes on to that partner’s children (if a partner’s child had predeceased the partner, his or her children, the partner’s grandchildren, would inherit his or her share). It specifically said that no other family members could inherit; specifically, spouses, stepchildren, and domestic partners were barred from inheriting.
The following year, Bertram wrote a will, and among the assets he left to his domestic partner Arlene was a $5,000 per month allowance, to be paid from a trust that would receive Bertram’s share of the LLC. In other words, his will contradicted the operating agreement of the LLC. This led to a dispute in probate court. In the end, Bertram’s son Robert and daughter Cathy were able to persuade the probate court that the operating agreement of the LLC should take precedence over the will. In other words, the LLC’s operating agreement made it a non-probate asset, so it passed directly to Robert and Cathy without going through Bertram’s estate.
Contact Us Today for Help
A Tampa probate lawyer can help you ensure that your will does not contradict the operating agreement of your company or any of the other documents in your estate plan. Contact David Toback for a consultation.