Your LLC and Estate Planning

by | Jun 19, 2024

Your Limited Liability Company (LLC) and Estate Planning

Establishing a limited liability company (LLC) in Missouri is a relatively simple process. To form an LLC, you’ll need to submit your articles of organization to the Secretary of State and pay a nominal fee. Unlike certain other states, Missouri doesn’t impose strict formalities for LLC registration. However, adhering to these formalities is essential, especially concerning estate planning. At Axis Law Group, our estate planning attorneys comprehend the nuances of LLC formation and can elucidate the significance of these formalities.

What is the purpose of an LLC?

As its name suggests, a limited liability company offers business proprietors liability protection, alongside other advantages. Specifically, an LLC separates business assets from personal ones, safeguarding the owner’s personal estate from business-related liabilities.

Consider this scenario: Robin Hood, who enjoys crafting hoodies, decides to sell them without forming an LLC. One of his customers, Red Riding Hood, purchases a hoodie but sustains an injury due to a defective drawstring, which impedes her breathing while fleeing from a wolf. She initiates legal action against Robin Hood for her injuries. Without an LLC, Robin Hood’s personal assets, including his bank accounts, are vulnerable. Had Robin Hood established an LLC, only his business assets would be susceptible to the lawsuit.

LLC Formalities

Creating an LLC is merely the initial step toward responsible business ownership. To avail oneself of the aforementioned liability protection, the law mandates adherence to three formalities:

Operating Agreement: This document delineates the functioning of your business. It’s crucial for defining roles and responsibilities within the company and can include provisions for the business’s disposition in the event of your incapacity or demise.

Business Account: A separate business account must be established. All business finances should flow through this account before reaching any personal accounts, ensuring the segregation of personal and business finances.

Annual Minutes: Maintaining detailed annual minutes concerning your business operations is imperative. These minutes typically encompass notes on the business’s performance and future objectives.

Adhering to these formalities ensures the legal recognition of your LLC as a distinct entity, affording you liability protection.

The Significance of Estate Planning

Many of our clients aim to circumvent probate, and understandably so. Probate can endure for a minimum of six months and can incur substantial costs for your estate. This process can burden your loved ones during a period of mourning.

What many individuals are unaware of is that a business account can trigger probate. Financial institutions don’t permit the designation of a beneficiary for a business account. Consequently, your operating agreement plays a pivotal role in avoiding probate. It can stipulate the disposition of business assets upon your incapacity or demise. Overlooking this aspect in your operating agreement can compel your family to undergo probate, even for a relatively modest sum in the business account.

LLCs furnish significant liability protection when the requisite formalities are observed. Allow Axis Law Group, your local Lee’s Summit estate attorney, to furnish you with the optimal tools for managing your business and sidestepping probate. Book a complimentary estate planning consultation today!