What are the Key Estate Planning Considerations for Ohio Business Owners?

For business owners, the importance of estate planning cannot be overstated. It's not just about ensuring your personal assets are distributed according to your wishes; it's also about safeguarding the future of your business. In Ohio, business owners should address several key legal considerations as part of their estate planning process. This includes transfer on death designations in operating agreements, adding individuals to state licenses, the importance of standard operating procedures (SOPs), and having a plan in place in case of incapacitation.

Transfer on Death Designations

Benefits of TOD Designations

One of the most critical estate planning tools for business owners is the ability to designate a transfer on death (TOD) beneficiary for their ownership interests. Ohio law allows shareholders of a corporation and members of a limited liability company (LLC) to name a TOD beneficiary for their shares or membership interests. This is done through the operating agreement or bylaws, ensuring that the business ownership seamlessly passes to the chosen successor upon the owner's death, bypassing the probate process.

How to Set Up TOD Designations

This not only simplifies the transition but also helps maintain the continuity of business operations (assuming your business does not have a professional license—read below if your business does have a license).

Adding Individuals to State Licenses

Importance of License Transfers

Many businesses in Ohio operate under state-issued licenses and permits. To ensure the continuity of operations in the event of the owner's death or incapacitation, it's crucial to proactively add key employees or family members to these licenses.

Process of Adding Individuals

The Ohio Administrative Code outlines the process for adding individuals to state licenses, which varies depending on the specific license type. As an owner, you may want to have an additional person on the license in the event of your death or incapacity. However, there are risks associated with adding another person. It is important to talk through the risks and rewards of adding someone to your license.

Risks and Rewards

If you choose to add someone to your license, it can prevent operational disruptions and ensure that the business remains compliant with state regulations.

Importance of Standard Operating Procedures (SOPs)

Creating Effective SOPs

Developing comprehensive standard operating procedures (SOPs) is another essential aspect of estate planning for business owners. As small business owners, you often keep your knowledge in your noggin; however, it's not great to allow the business to continue once you're a spirit in the sky. SOPs document the critical processes and decision-making protocols that keep the business running smoothly.

Benefits of SOPs

In the event of the owner's absence, these documents guide employees or successors, enabling them to continue operating the business effectively. SOPs can be done in writing or via video. There are many tools available to help you draft SOPs without adding much more to your plate! Some tools allow you to record yourself while you are doing the work, and they will create the policy for you.

Planning for Incapacity

Legal Framework for Incapacity Planning

Finally, it's crucial for business owners to have a plan in place in case they become incapacitated and unable to manage their business. Ohio's guardianship and conservatorship laws provide a framework for designating a trusted individual to make decisions on the owner's behalf.

Establishing Durable Power of Attorney

Establishing a durable power of attorney and a living will allow business owners to proactively choose who will oversee their business affairs, ensuring that their business can continue to operate smoothly even in their absence.

Communicating with Your Successor

Additionally, you should have conversations with your successor about what to do to keep the business operational if you cannot run it.

Conclusion

Effective estate planning is vital for business owners in Ohio. By incorporating transfer-on-death designations, ensuring key individuals are added to state licenses, developing comprehensive SOPs, and planning for incapacity, business owners can safeguard the future of their business and provide peace of mind for their families and employees. Consulting with an experienced business law attorney can help navigate these complex legal considerations and create a tailored estate plan that aligns with the business's and its owner's unique needs.

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