Creating a Limited Liability Corporation (LLC) for your business can be a wise part of your estate plan. LLCs helps protect assets and avoid taxes and probate.
Limited Liability Corporations Provide Personal Protection from Business Liabilities
If you are a sole proprietor or partnership, personal assets such as homes, cars and investments are subject to business liabilities. You and your business are considered to be the same “person” under the law. Business debts and lawsuits look to your personal assets for recovery. An LLC greatly limits this exposure because an LLC is legally separate from its owners.
LLCs are easy to set up. However, if you need help or want to avoid the time expenditure, reach out to a qualified estate planning attorney. We are always happy to help.
Limited Liability Corporations Often Help with Taxes
I defer all tax questions with regards to LLCs to certified tax accountants, but I can advise that many business owners find tax advantages with an LLC. LLCs take advantage of certain business deductions, self employment tax reductions and ‘pass-through’ taxation.
Limited Liability Corporations and Probate Avoidance
Though an LLC is a great idea for the reasons of protecting personal assets and minimizing taxes, LLCs in North Carolina very often must run through probate after the death of an owner. This can cause great difficulty for business operations, cash flow and tax reporting because all revenue streams must run through the estate. Heirs are often left without access to ownership and financial returns during probate. These difficulties can drag out for months or even years until the probate process is closed. The question of whether or not an LLC will be forced through probate gets complicated because of various ownership structures and operating agreements.
Regardless of the structure of an LLC, the threat of probate can often be avoided by setting up a revocable trust as the owner of an LLC. This allows for a timely and seamless ownership transition, one devoid of many of the difficulties I mentioned. Again, this all gets complicated, so seek the advice of a qualified estate planning attorney to work through your specifics when it comes to LLCs and avoiding probate.
