Estate Planning for Business Owners in Lockport and Will County
If you own a business, your estate plan has to answer who runs it, who owns it and who gets paid after you die or cannot work. If you own it as a sole proprietor, the executor can run it for one month after letters issue unless the will or the court allows more. A written plan avoids a gap.
Three questions every owner should answer
Every business plan for the owner's death comes down to the same three questions.
- Who runs it? Someone has to sign checks, talk to customers and keep the doors open the day after you are gone or hurt.
- Who owns it? Your shares, your membership interest or your sole proprietor assets go to someone, and you choose who.
- How does your family get paid? A business is rarely cash. If your family depends on it for income or for value, the plan has to turn it into one or the other.
The answers differ for a one person shop, a family business, and a company with partners. Jeff starts with how your business is set up and who is involved.
If you are a sole proprietor
A sole proprietor is the business. There is no separate company, and the assets are yours personally. When you die, the business assets are part of your estate, and an executor takes over under court supervision.
The Probate Act gives the executor a narrow window. Under 755 ILCS 5/19-6, a representative may continue a decedent's unincorporated business for one month after the date letters are issued, unless the will says otherwise or the court directs otherwise. The court can authorize more time. While the business runs, the representative must file monthly reports with the court showing receipts and spending.
One month is short for a business with customers and payroll. A will that gives your executor specific direction, and a plan for who actually runs the work, matters. See wills and the Will County probate process.
If you own part of a company
If your business is a corporation or LLC, the company continues as its own legal entity. Your ownership interest, whether shares or a membership interest, is what passes at your death. What the company papers say matters a lot: bylaws, an operating agreement, a shareholder agreement or a buy-sell agreement. Those documents may limit who can inherit an interest, or set a price, or give partners a right to buy.
Your estate plan should match those papers. A will that leaves your shares to your spouse can collide with a partner agreement that says otherwise. Jeff reads both together so that they agree.
Get your plan done. Call Jeff.
Tell Jeff about your family, your home and what you want to happen. He'll explain the next step.Office hours: Monday to Friday 8:30 AM to 6 PM, Saturday 10 AM to noon. After hours, leave your name, number and the best time to call back.
Jeff McCarthy, Inspired Law Group, 136 E 9th St, Lockport, IL 60441
A trust for the business interest
Owners often put a business interest into a revocable living trust. A trust can name a successor trustee who steps in without waiting for a court. It can also give that person instructions about whether to keep the business, sell it, or run it until a child is ready. Learn the basics at revocable living trusts, and see the Do I Need a Trust tool for a quick read. The company papers may need to allow the transfer, so check them first.
If you cannot work
A plan for death is only half of it. An illness or accident can stop you long before that. A property power of attorney can name someone to sign for you, including on business matters, and a health care power of attorney handles medical choices. Without them, your family may need a guardianship to deal with your affairs. See power of attorney for property and adult guardianship.
Taxes and timing
The Illinois estate tax is figured on the gross estate, and that includes what you own in a business. The Attorney General says an estate may also elect certain valuation and payment deferral rules for Illinois purposes, as long as the estate meets the federal requirements. These elections are technical. If your business is a large part of your wealth, bring it up on the first call. The Illinois estate tax page explains the $4,000,000 threshold.
Passing the business to a child
Many owners hope a child will take over. Hope is not a plan. Ask whether the child wants the work, whether the child is ready, and what happens to children who are not in the business. Splitting ownership equally among children who do and do not work there can lead to conflict. Some owners leave the business to the child who runs it and balance the others with other assets or insurance. Others plan a sale. Jeff can talk through the options with you, and the right one depends on your family and your business.
If you want a gradual handoff, start now. Put the plan in writing, name a successor trustee or manager, and tell the people involved. A plan nobody knows about is hard to carry out.
What to bring to the first call
- The legal form of the business and the state where it was formed.
- Your operating agreement, bylaws or partnership agreement.
- Any buy-sell agreement and any life insurance that funds it.
- A list of key employees, customers, licenses and bank accounts.
- Names of the people who could run it or buy it.
Sources
Reviewed by Jeff McCarthy, Attorney, Inspired Law Group, 136 E 9th St, Lockport, IL 60441.
Questions people ask about business owners
Short answers first. Jeff McCarthy reviews every answer on this page.
It depends on how it is set up. A sole proprietor's business becomes part of the estate and the executor can continue it for one month after letters are issued, unless the will or the court says otherwise. Company papers control ownership of an LLC or corporation.
Under 755 ILCS 5/19-6, a representative may continue an unincorporated business for a month after letters issue, and the court can allow more time. The representative files monthly reports.
It can help a successor take over without waiting on a court. The company's papers may limit transfers, so check them with Jeff before you sign.
Do not count on it. The business papers can limit who inherits an interest. The two sets of documents should agree.
Insurance is often used to fund a buyout or to give the family cash. Ask Jeff how it fits with your agreement.
The tax is measured on the whole gross estate, and the threshold is $4,000,000. A small business counts toward the total, along with everything else you own.
Keep reading
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Every case comes down to its facts and its deadlines. Talk with Jeff McCarthy so you can:
- Get clear on your legal options.
- Avoid costly mistakes.
- Know what happens next, and when.
