It is wise to create a wall of legal separation between your personally held property and your business. One very commonly utilized solution is the limited liability company (LLC).With an LLC, you don’t have to rearrange your tax situation, because it is a pass-through taxation entity. This means that you would claim your profits and losses on your individual tax return.Once you establish a limited liability company, your personal resources would be protected if your business entity was sued. On the other side of the coin, generally speaking, assets in the business would be protected if you are sued individually.A family limited partnership is another structure that can provide asset protection for family business owners.
This is a commonly asked question, and the widely embraced solution is the purchase of life insurance.First, you determine the value of the business that will be passed along to one of your children. You can then balance the inheritances by taking out life insurance policies of equivalent value and make your other children the beneficiaries.
This can be done through the execution of a buy-sell agreement called a cross purchase plan, and it also revolves around the utilization of life insurance.You and your brother would agree on the value of a business share, and you would take out life insurance policies on one another that will pay out this amount. After the first partner dies, the surviving partner would use the proceeds from the insurance policy to buy the deceased partner’s share.
It could be, but it would all depend on the value of the property in question. The federal estate tax can indeed take a heavy toll, because it carries a 40% maximum rate. That’s the bad news, but the good news is that there is a relatively high exclusion.The exclusion is the amount that can be transferred before the estate tax would be applied. The exact figure changes year-by-year to account for inflation but suffice to say it is in excess of $11 million.If the value of the farm exceeds this amount, the estate tax would be a factor, but there are tax efficiency strategies that can be implemented.
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We have looked at a handful of questions here to address some of the basics, but there is much more to understand about estate planning for family-owned businesses and farms.
An attorney from our firm would be more than glad to gain an understanding of your situation and explain your options so you can make informed decisions. Should you decide to go forward, we will help you devise a custom crafted plan that is ideal for you and your family.
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