Nashua Business Owner Has Questions
The Covid-19 pandemic has created a new sense of urgency in the local business community to implement or update their business succession plans. A comprehensive business succession plan will increase the chances that a business will survive the retirement, disability, or death of its owner. A good plan will combine estate planning strategies with business planning strategies.
One initial step a business owner should take is to make sure the business will avoid the delays, cost, and entanglements of the probate process in the event of the unexpected death of an owner. The following are some initial steps to consider:
- Take advantage of New Hampshire’s Uniform Transfer on Death Act. RSA 563-C. A member of an LLC, the shareholder of a corporation or the partners of a partnership might insert a clause in their governing legal documents (the LLC Operating Agreement or a Shareholder/Partnership Agreement) that designates a beneficiary of their business interest. For example, “Upon my death my LLC Interest shall be transferred to my husband, John Doe.”
- The LLC interest or corporate stock can be owned directly by the Trustee of a trust for the benefit of specifically named beneficiaries. In the case of a manager managed LLC, the LLC interest can be held by the trustee of the trust while the LLC can be managed by its duly authorized manager or managing member.
Multi-owner businesses should implement a so-called “buy-sell agreement”. In many instances a buy-sell agreement will be funded with life insurance, if necessary. A few of the key questions to address in a comprehensive business succession plan are:
- Will the business have sufficient resources to hire someone to replace the owner in the business?
- Will the continuing owners pay the heirs of the departing owner a fair price for his or her business interest?
- Is the buy sell agreement adequately funded and fair to both the departing owner and continuing owner(s), and;
- How is the price of the departing owner’s interest determined and how will it be financed (internally or by third party financing)?
Should you know a business owner who needs assistance with answering these questions and developing a comprehensive plan to implement a buy-sell agreement, estate planning and business succession planning, please have them contact the business attorneys at Welts, White and Fontaine, P.C., and ask for Attorney John S. Polgrean (603) 883-0797 or firstname.lastname@example.org
Author: John Polgrean