Daniel W. Uhlfelder P.A. | Attorneys At Law


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What shareholders and partners need to know about estate planning

On Behalf of | Mar 3, 2023 | Estate Planning

Perhaps you started a business with your best friend from college, and the two of you have successfully run a business as partners for years now. Or maybe you are a shareholder who has invested in a business and now attends meetings to help grow the business and guide its development.

As a business partner or shareholder, what you have invested in the business so far has helped the company to grow, and you benefit from that by receiving a share of the profits. You also have some control over the management of the company. Shareholders, for example, are able to attend certain meetings and vote, and partners can have a profound impact on business operations.

This ownership interest will require special consideration when you are planning your estate.

You must address responsibilities and investments

As a shareholder, your biggest concern will likely be naming the right recipient for your interest in the company and ensuring the most effective means of transferring your interest to that party. Using a will or trust to name a specific beneficiary and ensure the smooth transition of ownership rights will be crucial to protecting the integrity of a shareholder interest in this way after your death.

If you are a partner, however, you will have to take some additional steps. You’ll likely need to communicate with the other partner(s) at the company about your exit and consider the business’s needs in addition to your own wishes. It may be possible to grant an ownership interest to a beneficiary while giving the partner that you have worked with for years sole control over business operations.

On the other hand, you might want to create a succession plan to help someone take over your role, including your management of the company and its daily operations. Making sure that any successors you name are competent enough to help manage the company and can work with your partner will be as important as ensuring you have taken the proper legal steps to allow for the transfer of your ownership interest.

Business assets can cause estate complications

Your interest in a company could prevent you from qualifying for benefits when you age or put your estate at risk of federal estate taxes after you die. Determining what your ownership interest is worth and addressing your role at the company, as well as your investment in it, will be crucial while estate planning as a partner or shareholder.