When an Arkansas business owner dies, there can be extreme confusion in regards to what happens to the business going forward. Without a clear business succession plan in place, there could be uncertainty regarding the continued operation of the business, its ownership, and its leadership. Accordingly, every business owner should engage in estate planning to make sure their business’s future aligns with their wishes after they pass.
If you own a business in Arkansas, continue reading to learn more about what could happen to your business if you pass away and how you can protect it.
The Business Structure Will Determine What Happens After an Owner Dies
In the absence of a succession plan, the business structure will play a key role in determining what happens to the business if the owner passes away. The following is a brief overview of how different business structures In Arkansas are affected upon the owner’s death.
Sole Proprietorship
In a sole proprietorship, the business is owned and operated by one person. A sole proprietorship cannot exist without the owner; therefore, it ceases to exist when the owner dies. While the business ends, any assets or debts the owner had from the sole proprietorship will become a part of the owner’s personal estate. These will be distributed by the Probate Court according to the owner’s will, or in accordance with Arkansas’ intestacy laws, if they died without a valid will.
LLC
In a Limited Liability Company, or LLC, the business will continue according to the LLC’s Operating Agreement. The Operating Agreement should instruct what should happen to a member’s interest upon their death, such as whether other members will buy out the member’s interest, if interest will transfer to another member, if the LLC will be dissolved, etc. Without an Operating Agreement in place, the LLC could be dissolved or the member’s interest could pass through to their heirs in probate.
Corporation
A corporation is a business entity that is separate from its owner so it continues to exist if the owner dies. When a shareholder/ owner of a corporation dies, their shares will become apart of their personal estate and their ownership shares will be distributed in accordance or with their will or by Arkansas intestacy laws, if they died without a valid will.
Partnership
In the state of Arkansas, the death of a partner leads to dissolution if there is no Partnership Agreement in place. As such, every partnership should be operating with a Partnership Agreement to provide directions for the business in case of a death. Arkansas law allows for the personal representative of the deceased partner’s estate to exercise the rights of a limited partner for the decedent’s ownership interest in order to settle the estate.
Business Succession Planning is Important To Protect Your Interests
If you own a business in Arkansas, you should think of succession planning as an extension of your estate plan. It is important to work with a qualified attorney when forming your business. You will want to select the best type of business structure in accordance with your tax, liability, and estate needs. You will also want to make plans for the business in case something happens.
L. Jennings Law can help with all areas of business law and estate planning. Our attorneys understand that you have worked hard at building your business, and we are here to ensure that it remains successful.
Contact L. Jennings Law Today For All Your Business and Estate Planning Needs
At L. Jennings Law, we specialize in both business and estate planning, including creating business succession plans for business owners. With convenient locations in Little Rock and Magnolia, we prioritize accessibility for our clients. By implementing effective legal strategies, we can ensure that your business will prosper after your passing and that your beneficiaries are safeguarded. Contact us today to schedule a consultation and ensure your estate plan is prepared to protect yourself, your loved ones, and your business.
