Craig J. Bauman Attorney at Law - California
email cjb@californialawpractice.com or call (858) 488-1497

An important asset for many people is their business that they have worked hard to build and keep. Depending on the type of business, the Limited Liability Company form of business entity or the Incorporation of a business, may be an excellent way to protect your other assets, while at the same time, taking advantage of the other legal and tax advantages that each of these business forms provide. In consultation with either your tax advisor or a tax advisor that I can provide, we select the optimal business entity. With both forms, there are initial fees payable to the State, as well as my legal fees for establishing the business entity. Fees are based upon the size and complexity of the business being modified.

Advantages in Estate Planning / Saving Estate Taxes

The Estate Planning aspect of both LLCs and Incorporations (and Family Limited Partnerships in certain circumstances) is that through both, businesses may be maintained and continue to operate, under the control of the owner, with the option of using such business vehicles to avoid estate taxes.

Typical scenario: Owner of large, very successful business has, (therefore), a very large estate that is clearly over the estate tax exemption amount. The owner's family knows nothing about running the business and realistically cannot be directly involved in the operation of the business. LLCs act as limited partnerships, wherein the general partner runs the business and the other limited partners are just investors. Similarly, it is very common to buy stock in a corporation and the stockholders know nothing of how the corporation is run.

For estate planning purposes, basically the general partner of the LLC or the Chairman of the Board of Directors authorizes the gift of ownership shares (LLC) or stock (Corporation) to heirs, using that person's yearly gift tax exemption amount (currently $12,000 per person, per year) to make it a tax-free gift, while maintaining the majority ownership share (and control) of the business. By the time the person dies, between what has been given and the tax-free increase in value of those shares over time, the size of the estate (and the amount of estate taxes due) is greatly reduced, to the advantage of all heirs.

Alpine, San Diego Oceanside, San Diego
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For more information, please contact:
Craig J. Bauman Attorney at Law - Local to San Diego, California
email cjb@californialawpractice.com or call (858) 488-1497