estate planning for small business owners

Estate Planning for Small Business Owners

Our estate planning firm, Phelps LaClair, is a second generation business serving Gilbert, Chandler and Mesa. Being the second generation, we understand how important it is to plan for the future. Estate planning for small business owners with a multi-generational business requires intentional consultation with family members and partners to ensure a successful transference. After all, the family’s future relies on the business.

Some businesses are single person owner-dependent enterprises. Estate planning for these businesses is no less important. It is often the sole source of income and retirement for the owner and his/her family.

Key Transitional Planning

If either generational transference or the sale of a business is part of the plan, business owners must plan well in advance for that time. Estate plans need to account for the present assets and liabilities of the business. The plan also needs to anticipate what the estate will consist of after the transition.

Management development must begin years ahead of time so there are no hiccups when exchanging the reins of the business. A succession plan must be in place before the time of transition approaches. Buy-sell agreements must be documented and filed—we can help with that.

Successors’ estate plans must account for a future with increased responsibilities, assets, and liabilities. They will likely have a different tax situation that will affect their estate, and they may be facing many years of buyout payments and reduced income.

Owner-Dependent Considerations

Owner-dependent businesses need business plans that will enable them to generate maximum profits each year with reduced liability. The owner’s income and retirement will be funded from business profits, not just revenue. Many business owners, such as doctors, dentists, and lawyers, decide to go this route.

With an owner-dependent business, management is often a one person affair, so no development (other than personal) is needed. Often, less money is reinvested for growth, giving greater income potential. Keeping overhead as low as possible is one of the keys to success, so any staff are usually engaged on a contract basis.

Because there will be no sale of the business and no successors, the estate plans of an owner-dependent business must focus on minimizing liability risk—possibly through an LLC, good insurance, and a revocable living trust. Minimizing risk also entails documenting that the business is not suitable for transference, and that there is the intent to terminate the business upon the owner’s death or retirement. This reduces tax exposure for the estate.


Estate planning for small business owners can be complicated. But you need not feel lost in a maze. There are many options available for protecting personal assets from business claims, and for ensuring a successful transference of both business and inheritance from one generation to the next. Call Phelps LaClair for an appointment to discuss your situation and estate plan needs. Your first consultation with us is free. Let us help you secure your future!



Images used under creative commons license (Commerical Use) 08/23/2019  Photo by rawpixel from Burst

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