An LLC is a type of business entity that is an alternative to a sole proprietorship or a corporation. LLCs are a good option for many business owners who want more protection from liability than a sole proprietorship or a partnership would provide. LLCs can also be used in estate planning.
If you are currently running a business as a sole proprietor, you should talk with an Annapolis estate planning lawyer about whether you should create an LLC or otherwise change the structure of your company to reduce the personal risk you currently face. An experienced attorney can also provide guidance on whether creating a Limited Liability Company could be a viable estate planning option for you.
Sinclair Prosser Gasior has extensive experience advising entrepreneurs and business owners and extensive experience advising all clients on the estate planning process. Give us a call today to find out about how we can assist you.
Why is an LLC Better Than a Sole Proprietorship for Many Businesses?
If you are operating a business and you have not formed a specific type of business entity by filing paperwork with the state of Maryland, you are probably operating as a sole proprietorship. This is the simplest kind of business structure and many business owners start out operations as sole proprietors since there aren’t any specific requirements for operating a company as this type of business entity.
Unfortunately, when you operate as a sole proprietorship, there is no legal separation between you and your business. You and your company are one and the same. If your business has to go bankrupt because the company cannot become profitable, you cannot file for business bankruptcy without also filing for personal bankruptcy. Your own wealth and credit could be at risk.
If you operate as a sole proprietor, you are not only liable for debts incurred by your business, but you could also face personal liability if the company is sued. This also puts your own assets at substantial risk of being lost.
Creating a Limited Liability Company makes it possible to create a legal identity for your business that is separate from yourself. You can put your own personal assets beyond the reach of company creditors and ensure your own wealth won’t be lost due to a judgement against your business. As long as you follow the rules for keeping your personal assets separate from the LLC, your losses should be limited only to what you’ve invested in the LLC.
Since an LLC allows the company to exist separately from you, it can also be easier to transfer ownership of an LLC and you can maximize the chances that your company will continue to exist even after you’re no longer personally involved with it.
How are LLCs Used in Estate Planning?
LLCs can be used for more than just protecting yourself from liability if you have a business. LLCs allow for the transfer of ownership, without giving up control or creating a liability risk. This means that you can create an LLC during your life, transfer ownership interests in the LLC to your heirs or beneficiaries, and still maintain control. This makes it possible to transfer less assets during the probate process after death, thus reducing estate tax that is assessed by the state and federal governments.
Transfer restrictions can be utilized with LLCs that help to protect assets from the risk of being loss to creditors, and transferring fractional shares of LLC interests can also create transfer tax discounts, as minority shares in an LLC tend to be worth less and are less marketable due to the fact the owner has fewer rights.
Sinclair Prosser Gasior can provide you with guidance on the benefits of LLCs in the estate planning process and can assist you in determining if using an LLC as part of your plan would be beneficial or if there are other legal tools that are more appropriate in your particular situation.
Getting Help from An Annapolis Estate Planning Lawyer
Understanding the use of LLCs in estate planning can be complicated, as can protecting your assets and your company when you own your own business. You need to get comprehensive legal advice from a qualified professional who knows the ins-and-outs of estate planning and business entity creation. Sinclair Prosser Gasior can help.
To learn more about the asset protection and estate planning issues that affect business owners, and to find out how to make effective use of legal tools to protect your wealth, give us a call at 410-573-4818 or contact us online today. You can also join us for a free seminar to get more information about the estate planning and business planning process. Contact us now to find out more.