Why Every Business Owner Needs an Estate Plan

If you’re a business owner, you’ve likely poured years of hard work, late nights, and personal investment into building something meaningful. But here’s a hard truth: if you don’t have a clear estate plan that includes a business succession strategy, everything you’ve built could be left vulnerable—or even unravel—after you're gone.

Estate planning isn't just about who gets what. For business owners, it's about continuity, control, and protecting your life's work.

1. What Happens to Your Business if You’re Gone or Incapacitated?

If you were to pass away unexpectedly or become incapacitated, what would happen to your business tomorrow?

• Would your family know who is supposed to step in?

• Would your team know who’s in charge?

• Would your ownership interest trigger a court process like probate?

A solid estate plan ensures that your wishes are clearly documented and legally enforceable. It avoids uncertainty, conflict, and costly delays for your business and loved ones.

2. Who Will Inherit or Run the Business?

If you have partners or co-owners, your operating agreement or buy-sell agreement should spell out what happens to your ownership share. But that’s only one piece of the puzzle. Your personal estate plan should align with those documents to ensure a smooth transition and avoid disputes between heirs and business partners.

If you’re a sole owner, you’ll need to decide:

• Should your business be sold or passed on to a family member?

• Do your heirs have the interest or skills to run it?

• Who will guide the business through the transition?

Without answers to these questions, your business could stall or collapse just when your family needs it most.

3. Minimize Taxes and Protect the Value You’ve Built

Proper estate planning can also help minimize estate taxes and protect your business from forced liquidation to cover unexpected expenses. Tools like revocable living trusts, irrevocable trusts, and gifting strategies can be used to preserve value and provide liquidity when it’s needed most.

4. Plan for Incapacity, Not Just Death

Estate planning isn't only about the "what ifs" after you're gone. If you become temporarily or permanently incapacitated, who will be authorized to make decisions, sign checks, and run operations? A durable power of attorney and business continuity plan are essential for day-to-day protection.

Your business is likely one of your most valuable assets. Don’t leave its future up to chance. By integrating your estate plan with a well-thought-out business succession strategy, you protect what you've built, care for your team and family, and leave behind a legacy—not a legal mess.

At Shafae Law, we work with business owners across California to create clear, custom estate plans that address the complexities of business ownership and succession. If you’re a business owner, now is the time to put the right plan in place.

What You Need to Know About the Corporate Transparency Act

The Corporate Transparency Act (CTA) is a new federal law aimed at combating financial crimes such as money laundering and fraud by requiring certain businesses to disclose information about their owners. This law affects small businesses, corporations, and limited liability companies (LLCs), making it crucial for business owners to understand its requirements.

Who Needs to Report? Any corporation, LLC, or similar entity registered in the U.S. must report its "beneficial owners" unless it qualifies for an exemption. A beneficial owner is anyone who exercises substantial control over the company or owns at least 25% of its interests.

Certain entities, like large corporations with over 20 full-time employees and more than $5 million in gross revenue, or entities already subject to other federal reporting, are exempt. However, most small and family-owned businesses will need to comply.

When is the Deadline? The initial deadline to report under the CTA is January 1, 2025. Any entity created or registered before January 1, 2024, must file its report by this date. For businesses formed after this date, the report is due within 30 days of registration.

What Needs to Be Reported? Entities must disclose information about each beneficial owner, including:

• Full legal name

• Date of birth

• Residential or business address

• A unique identifying number from an acceptable ID (such as a passport or driver’s license)

The report is filed with the Financial Crimes Enforcement Network (FinCEN), and failure to comply can result in significant penalties, including fines or even criminal charges.

If you are a small business owner with concerns about how the Corporate Transparency Act affects your estate plan or business structure, our estate planning law firm is here to guide you through the process. Reach out to us for for a referral to our network of compliance advisors and to ensure you stay compliant while safeguarding your business and family’s future.

Estate Planning for the Self Employed

It takes a lot of courage and hard work to start your own business. Small business owners develop adept skills at being adaptable, flexible, and resourceful. That being said, small business owners are vulnerable to catastrophic risk everyday. Small businesses focus a lot on economic and financial risk. Often overlooked is the impact of personal crises. If an untimely personal crisis–death, injury, incapacity–were to occur, it’s important to ensure that there is a plan in place so that the business can continue to operate, especially if your loved ones are counting on the business to continue.

Succession Plan

A succession plan for your small business is like an estate plan for the business. It defines who takes over the business when you are unable to. It also may include options for certain parties to purchase the business. It helps avoid ambiguities, in-fighting, and allows the business to seamlessly transition without disruption. The succession plan should work in concert with the estate plan. A succession plan can help bridge any gaps between your estate plan and the operation of the business when there are more than one party involved in owning or managing the business. For example, your estate plan can only address your ownership stake in the business. It cannot dictate what co-owners or partners do. A succession plan allows you to create a binding plan on all parties involved.

Special Licensure or Expertise

Perhaps the business at issue is a professional or medical service. If the business relies on special licenses to operate–CPAs, architects, lawyers, dentists, therapists, etc.--then the estate plan and succession plan needs to nominate and appoint appropriate decision makers to step in when you are unavailable. Even without needing special licensure, if the business is primarily fueled by your expertise, a comprehensive plan will account for this. Otherwise, there ought to be a plan for winding down the business if continuing is not possible.

Vendors and Clients/Customers

A comprehensive estate plan addresses all of the authority necessary to conduct your affairs when you are unavailable. This includes dealing with third parties like vendors to the business and the clients and customers of the business. Without the proper authority, those interacting with the business may become frustrated and take their business elsewhere.

There is no blueprint for a proper estate plan dealing with a small business. Part of the reason you started your own business was for autonomy and to be able to conduct business your way. That also means you will need to tailor your estate planning to address every aspect of operating your business.