If I Die, What Happens to My Business in Florida?

by | Feb 4, 2021

If I Die, What Happens to My Business in Florida?

By: Barry E. Haimo, Esq.

February 4, 2021

When you run a business, planning your estate isn’t just about signing over your financial accounts and personal possessions to heirs or completing a power of attorney and outlining medical directives.

One of the most common questions from Haimo Law clients who are also business owners is “If I die, what happens to my business?” This concern can be especially critical when you aren’t the only one involved in the work you do.

What happens to a Florida business after a business owner’s death depends upon two primary factors: how the business is structured and whether the owner created a succession plan. Florida courts look at both to help your survivors determine the future of your business.

Four Common Structures for Florida Businesses

Regardless of the depth of the business planning done prior to starting your company, when you registered with the state, you made decisions about the structure of your business. Over time, you may or may not have altered that structure as it grew.

Whatever the case, this basic structure becomes the foundation for how your business will continue when you’re no longer around. 

In Florida, there are four general business structures. If you do not have a succession plan for your business in place, selecting the right structure is key to meeting your business estate planning goals.

What are these four structures, and what happens with each one?

Sole Proprietorship: Your Business Ends with You

A sole proprietorship is the business structure used when it’s just you. In the eyes of Florida law, these two entities — the owner and the business — are one and the same. As the owner, you are the business, and the business is you. 

Essentially, sole proprietorship means that when you die, so does your business. Your estate will liquidate business assets, pay all business debts, and distribute any remaining assets to your beneficiaries.

Business Partnership: Sharing Responsibilities

While there are a number of ways to structure a partnership, at its core, every business partnership usually involves a formal agreement between (or among) entities to share responsibilities, liabilities, and profits. Similar to a sole proprietorship, a partnership is not separate from its owners. 

With a formal agreement, your partners are able to continue operations as well as allow for the acquisition or sale of your business interests after your death. Without it, the partnership automatically dissolves.

Limited Liability Company: Separating the Business from Its Ownership

Establishing a Florida Limited Liability Company (LLC) is one strategy utilized by both sole proprietors and partners in order to separate themselves from the liabilities associated with their business. LLCs should always have a solid operating agreement, which will address ownership, control, management, voting, allocations of profits and losses, distributions to partners, transfers of interests, divorce, bankruptcy, and disability, to name a few things. 

This operating agreement typically also specifies what happens when one of its members passes away. If it outlines that the business should go to and continue under surviving partners, for example, it will. If it doesn’t, however, then Florida law determines what happens next.

Corporations: The Estate Automatically Owns the Decedent’s Shares

Unlike any other business structure, when you incorporate, your corporation automatically lives on after you’re gone. When any of the owners dies, their estate becomes the owner of any shares they own in the company until the estate is closed and shares are distributed according to either the decedent’s will or intestacy laws in the state of Florida.

Clarifying Your Wishes with a Business Succession Plan

For most entrepreneurs and business owners, a primary driving force behind the work we do is to build a legacy we are proud of — something we can pass on to our successors. 

And while the structure you establish for your business will certainly govern the way it is handled, there is an additional (often neglected) business planning tool that can further ensure your business is passed on exactly the way you would have hoped: your business succession plan.

A succession plan is an outline of how an owner wants to transition the leadership of their business. For some, that means in retirement. For others, an illness may be a catalyst. And every plan may be implemented upon the owner’s death. 

Some of the most common elements addressed in a succession plan include: 

  • Anticipated timing of the transition
  • Named successor(s)
  • Business valuation and tax planning
  • Communications with staff, clients, and family
  • Provisions for implementing the plan

Ultimately, if you wish to exercise maximum control over the future of your business, the key is having it written down. Reviewing your documents annually and working with an experienced business estate planning firm are two of the biggest steps you can take in the right direction. 

If you are a Florida business owner with questions about whether your current business structure is one that will help you meet your business goals, or if you need help developing a solid succession plan, reach out to Haimo Law for advice.

Author:
Barry E. Haimo, Esq.
Haimo Law
Strategic Planning With Purpose®
Email: barry@haimolaw.com

YouTube: http://www.youtube.com/user/haimolawtv

 

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