Family LLC & Partnership Formation
Many entrepreneurs consider the business they formed, crafted and grew into a successful enterprise like a member of their family. Passing that passion for the business down to the next generation of family members can be a challenging task. We listen to business owners and work with them to restructure or form entities to position their business for success now and in the future by addressing transition, financial and tax considerations.
Merely forming a family limited-liability company (LLC) or partnership does little to deal with succession planning issues. Our attorneys are experienced at helping clients create family LLCs that structure the ownership of assets and isolate potential exposure to liabilities. The LLC needs a carefully crafted operating or buy-sell agreement considering items such as:
- Transitioning control of the LLC upon the death or disability of the LLC’s controlling owner.
- Allowing for the next generation of family members to receive ownership interest in the LLC. Oftentimes a business owner may establish the LLC with voting and non-voting interests, allowing for family members to share in the LLC’s appreciation while protecting the owner from ceding control.
- Providing the controlling owner, or the owner’s spouse or children, with sufficient liquidity upon retirement, death or disability. Where life insurance will be used to fund the buyout of an owner, we may suggest establishing a separate LLC to own the life insurance to mitigate potential negative liability and tax issues.
- Formulas for valuing the business in the event an owner is bought out by the business itself or other owners. Careful consideration of an owner’s business, tax and cash-flow objectives is necessary to craft an effective valuation formula.
- Restrictions preventing key owners from competing with the business after selling their interest in the business.
Related Practice Areas
- Business Valuation, Structure & Discount Planning
- Planning for Identifying Successors
- Family LLC & Partnership Formation
- Income, Estate & Gift Tax Analysis
- Estate Planning
- Estate & Trust Administration
- Establish & Restructure Business Entities
- Developing a Transition Plan for Business Succession, Including Assets, Ownership & Control
- Analysis & Restructuring of Assets to Meet Client Objectives
- Analysis & Preparation of Shareholder, Operating, Partnership & Other Ownership Agreements