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LLC Planning For Your Business and Family

I am frequently asked by small business owners if they should have a separate LLC or multiple LLCs for their assets. The answer is “it depends” – What are your objectives is for considering this planning?

When it comes to understanding your how to organize your estate so that it can be properly managed regardless of your capacity to do so, the key concept is ownership. How do you own your assets? How should you own your assets? How can you easily pass along this ownership to your loved ones?

When it comes to business assets, whether in the context of ordinary day-to-day operations or as a business owner setting up your estate plan, how you own that business asset remains the most important component of proper planning. Once that concept is addressed then the next question that arises, is whether those business assets should be titled in separate LLCs in order to provide greater asset protection.

I came across a recent article in CPA Magazine and, according to the author, there are additional advantages to be gained to dividing your business assets into separate LLC. Namely, dividing multiple business entities into separate LLCs allows you, as managing member, to move the ownership of assets around between family members or employees with greater ease.

This can be accomplished with careful planning, corporate due diligence, and various planning tools such as a sale-leaseback or a gift-leaseback whereby the business owner either leases or gifts the asset to a family member or employee and then immediately leases it back, thereby transferring ownership to potential successors while retaining comtrol over operations of the company until such time as you are ready to retire. Of course, planning such as this is not 'one size fits all' but can be the perfect solution for many small family businesses in order to preserve that business for the next generation.

Whether or not this is the appropriate plan for your business is a question only you can answer, after much discussion with the parties involved, your own due diligence and in consultation with competent counsel . In the end, it all comes down to your own unique goals, both for your business and your family.

Reference: CPA Magazine (2011) “How to Determine if a Separate LLC is Right for Your Assets

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