There are a number of advantages of transferring your business interest into a revocable living trust. Benefits generally include relieving your family from carrying the burden of your business debts and the potential to reduce the tax burden on your estate. Below are the effects of several types of business ownership:
1 - Sole proprietorships. Transferring a small business during the probate process can present a challenge and may require your executor to keep the business running for months under court supervision. Often, sole proprietors hold business assets in their own name, so transferring them to a trust would offer some protection for the family. For a sole proprietor, transfers to a trust are generally the same as transferring any other type of personal assets you own, including your business name.
2 - Partnerships. With partnerships, you may transfer your share in the partnership to a living trust. If you hold an ownership certificate, you will need to have it modified to show the trust as the shareowner rather than yourself. It is important to note that some partnership agreements may prohibit transferring assets to living trusts, so you will want to consult a financial adviser or attorney.
3 - Limited liability companies (LLCs). Depending upon your operating agreement, LLC business owners often need approval from the majority of owners before they can transfer the interests in the company to their living trust. Once transferred, the voting ability remains with you, but your ownership share will fall to the trust.