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The old statute governing the formation, operation, and management of limited liability companies (LLCs) in Minnesota will be repealed and replaced by the new statute on January 1, 2018. The transition from 322B to 322C began on August 1, 2015 when the new LLC statute went into effect. Since then, LLCs have had the opportunity to ‘opt in’ to the new Act, and starting January 1st, 2018, all LLCs will be governed by the new Act whether they have opted in or not.
The column is a good reminder for all business owners to not only review their corporate documents with other business owners but to also give consideration to what may happen to a business that they themselves are the sole owner/member. A well thought out estate plan will also incorporate an individual’s business interest into their own estate plan.
Does your spouse or a close relative/friend have a set of keys to get into the business location? Does someone other than your self have the authority to write checks for the business? What about a list of key people you work with for your business (attorney, accountant, etc.) or list of passwords for your computer system?
To help prevent your business from being inoperable at your death, it is important to think through some of the above day to day operational considerations. Will your family/heirs know what the plan is to liquidate the business long term? Do you already have a buyer lined up with a promise of the right of first refusal to purchase your business to another individual or business owner? It is important to communicate this information to your heirs to help smooth the transition for them and still retain or collect as much value for your business as possible.
It may be as simple as updating corporate documents to add your spouse or trusted friend/relative to have access to your corporate accounts if something were to happen to you. If however that does not fit well for you, establishing a trust is another estate planning tool that can be used to transfer and manage property. The business interest can be transferred to the trust to ensure that descendants or successor trustees have the ability to step in after your death to manage the business. The successor trustee is another means to provide for management of the business until heirs are old enough to step in and take over the business. A trust can also help you avoid probate and going through the public court process to transfer assets to your heirs after your death.
As you are working through your business documents and linking them to your estate plan, don’t forget to include the usual estate plan documents: power of attorney and health care directives too. A well thought out plan goes a long way.
Please send me an email at rene@breenandperson.com with any topic suggestions or requests you may have. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.