As a business owner, it’s normal to want to leave your legacy to your children after you retire or pass away. But simply ‘wanting‘ to do this and ‘doing it correctly‘ are two different situations. When thinking about leaving your business to your kids, make sure you don’t set up a deadlock. Ensuring your business and estate planning lawyers are in sync can help prevent a business deadlock.
A deadlock occurs when businesses cannot move forward because the owners cannot agree on the best course of action. If 2 people equally own the company and have equal decision making authority, they must agree with the decisions to be made. But if they can’t negotiate an agreement – meaning neither will budge on their belief – then the business is in a deadlock. When you understand a business deadlock, you can work with your estate planning attorney to ensure it doesn’t happen.
If you are a business owner considering leaving your company to your children, you’ll want to ensure you don’t distribute your business in a way that will cause deadlock.
Effective estate planning requires knowledge and review of how your business runs and who can make the decisions. Estate planning for small business owners requires you to understand your company’s laws and how to pass the business on to your heirs.
Let’s say you have 2 children and want to leave your company equally to both. If your business currently requires a majority vote to make major decisions, the 50/50 split ownership to your kids may cause a deadlock if your kids don’t agree on a decision.
Another example is that your business may require unanimous votes on an issue. If you have several children and leave your business equally among them all, there may never be a unanimous vote. You could have one lone child that disagrees with all business practices and refuses to vote with the rest of the owners. They could, effectively, hold the business hostage.
As you can see, there are strong arguments as to why you should have your business and estate planning lawyers in sync. An experienced estate planning attorney can help you pass on your legacy in a way that will keep your business running, even after you are gone.
Do you have questions about setting up an estate plan that works with your business plan? Contact us today at the Estate & Probate Legal Group at 630-864-5835. Our experienced Illinois attorneys understand applicable laws and can advise you on the best options to protect your loved ones.
Areas we serve: Cook, DuPage, Kane, Lake and Will counties.