Forming a New Business in North Carolina? Do Not Forget Estate Planning Considerations

Small businesses are the backbone of our economy. The Small Business Administration (SBA) estimates that there are nearly 850,000 small businesses based in North Carolina. If you are forming a new business in today’s competitive market, you undoubtedly have a lot on your plate. Forming, building, and growing a successful business is complicated.

During this time, it is easy to overlook your estate plan—but doing so could be a very serious mistake. Entrepreneurs should always consider their estate plan when forming a new company. In this post, our Charlotte estate planning attorneys discuss the most important estate planning considerations for new business owners in North Carolina.

Forming a New Business is a Major Life Change—Revise Your Estate Plan Accordingly

Every adult in North Carolina should have a reliable estate plan. The purpose of estate planning is to ensure that you, your family, and your assets are properly protected. There is not one specific way to craft an estate plan. Your plan should be customized to suit your needs. Someone else’s estate plan is not going to work for you. Likewise, an outdated estate plan can cause major headaches. As a general rule, you should review and revise your estate plan after a major life event. Forming a new business is a major life event and it warrants an evaluation to confirm that your estate plan still protects your best interests.

New Companies Need the Right Legal Structure and a Business Succession Plan

When you form a new business, you are dealing with a lot of day-to-day uncertainty. To form a company that is going to last over the long term, you need to put the proper legal structure in place. Of course, this starts on the business side. Entrepreneurs should make sure that they are forming the right type of legal entity for the specific nature, needs, and objectives of their business. Depending on your circumstances, you may form a new business as:

  • Sole proprietorship;
  • General partnership (GP);
  • Limited partnership (LP);
  • Limited liability partnership (LLP);
  • Limited liability company (LLC);
  • S corporation; or
  • C corporation.

Every type of business entity has its own advantages and drawbacks. It is important to select that entity that fits your new company. Some key considerations include: cost/complexity of business formation, liability protection, tax consequences, and growth potential. Regardless of the type of business entity to choose, it is imperative that you and your partners have a comprehensive business succession plan in place. If you have any questions about succession planning, an experienced Charlotte, NC business succession planning attorney can help.

Consider Using a Buy-Sell Agreement to Protect Your Business and Your Family

In most cases, small business owners are heavily involved in the day-to-day operations of their company. This is especially true for business partnerships and other small companies with multiple owners. If you are forming a new business with another person, it is essential that you consider using a buy-sell agreement to protect the future operations of your company and the financial interests of your family.

Also frequently referred to as a buyout agreement, a buy-sell agreement is a legally binding contract that governs what will happen if one of the business owners unexpectedly passes away, becomes disabled, or otherwise needs to exit the business. A buy-sell agreement can be structured in a number of different ways. Though, in most cases, it gives the remaining business owners the initial right to purchase the outstanding shares of the business.

By crafting a buy-sell agreement when you form a new business, you will be in a position in which you and your partners will make a viable plan of action to address the worst case scenarios ahead of time. Without a buy-sell agreement, small business owners (and their families) are often left trying to navigate a difficult situation without the tools that they need to protect their rights and best interests.

Contact Our North Carolina Business Estate Planning Attorneys Today

At Arnold & Smith, PLLC, our North Carolina estate planning lawyers have the specialized skills and experience needed to effectively represent business owners. If you have any questions about business succession planning as a new business owner, we are here to help. To arrange your confidential initial case analysis, please do not hesitate to contact us today. We represent business owners throughout the entire region, including in Charlotte, Concord, Monroe, Mooresville, Gastonia, Davidson, Mint Hill, Indian Trial, Unionville, Salisbury, and Kannapolis.