Business and asset owners (including farming operations), at some point in their career lives, must ask the eternal question, “What happens when I’m gone?” Answering this question is critical to understanding and planning for the disposition of assets both before and after death. Two things are discussed often. One is estate planning, and the other is business transition. Many times these two processes are thought to be the same. Actually, they are very different.
The Columbus (NE) Telegram’s article, “Estate planning and business transition quite different,” reminds us that estate planning involves the transfer of wealth and assets of an individual (personal and business-related) from one individual to another or an entity.
Remember that estate planning doesn’t have to pass assets to an individual. A business asset (tangible and intangible) and ownership can also be transferred to a legal entity, such as a corporation, limited liability company, or a trust. And this can happened whenever the owner decides.
Business transition is simply the transfer of a business asset or the entire entity from an existing owner who has decided to retire or move on. This usually occurs during the life of the existing owner. However, when a business transfer takes place after the death of the owner, it’s usually part of an existing or implied estate plan or asset transfer process.
The process of business transfer can be a very simple process, or it can be complex and dynamic with many steps, based upon the wishes of the existing owner. There is a valuation of the business and the resources that must take place. The transfer of the tangible and intangible assets can occur through the cash purchase of individual items, a purchase of share interest, and/or purchase of stock or certificates. A cash sale, just like when buying a house, is the quickest and cleanest. A larger company with stockholders and a corporate structure takes some time.
The article reminds us that there are a number of similarities between estate plans and transition plans, but the big difference is timing of the transfer. Estate plans deal with the transfer of tangible and intangible assets and interests after the owner has died. A business transfer plan typically happens when the owner is still alive.
Neither of these is designed to be a replacement for the other. They work together, to fulfill the wishes of the business owner.
Live in South Florida? Give me a call (305-443-3104) so I can help you sort out the issues for your business and create both your business transition and estate plans according to your wishes as owner.
- I'm an exceptionally experienced Florida Bar Board Certified Estate Planning Attorney,
- I'm a Florida Bar Board Certified Elder Law Attorney, focusing on ALL legal issues related to aging,
- have prepared over 4,000 estate plans in 30+ years in practice, and
- am a Certified Financial Planner Professional™, plus
- I am also a Florida Certified Public Accountant (CPA).
Of course, if you would like more information about General Estate Planning in South Florida, I have a very informative website you are welcome to visit for more information.
Reference: Columbus (NE) Telegram (July 20, 2015) “Estate planning and business transition quite different”