When you are a military spouse and a small business owner, it's not uncommon to have your personal and business lives overlap. For many of us, having a flexible line between life and work is the only way we can keep all the balls in the air. It's also normal to think of alternate plans for home and children and maybe adult parents. Plans can change at a moment's notice.
How many of us have thought about having a Plan B for our business if something unexpected happens?
I brought up this issue and several other related questions in my interview with Lisa Landry, a Massachusetts and Rhode Island estate planning and business attorney. She had some helpful tips for milspouse entrepreneurs for business and life.
Dawn: When someone is a business owner, if you're just one person, is there a different consideration than if you have partners?
Lisa: When I have somebody who's in a multi-member LLC (the most common), there will be at least two people who are the manager. So, if one of them is in the hospital for a time or for any reason not available, the other one can continue on. But when you're the only owner and the only manager, if something happens to you (even for two or three days), it can be a huge mess in your business. That's why having a plan is even more important when it's such a small group or one person.
Dawn: How do you do the succession planning if you don't have another person to appoint? Is it left to the spouse to deal with if you don't have a plan for what happens to your business? Or does it depend on the state you reside in?
Lisa: Well, it's not just about the state; it's about people's wishes in that situation. There's no sort of state default where if you can't be the manager, your spouse, for example, automatically is. it's actually a complicated process to get there and an expensive one. So people don't normally do that.
But what I do when I set up an LLC with people is make sure that they know about emergency succession planning. Not the plan for retirement or sale of the business - the plan for ‘what if something happens unexpectedly?’ It's important to think about who you want to run things in your absence. It should be somebody who's nearby because they need to be able to access your records and everything that you have. Or if you're really good about keeping everything on your computer, it is someone that can access your files and records on the Cloud or similar. But this is more complicated to do so.
Dawn: If you don't identify and appoint somebody that's going to take over and something happens to you, what happens to your small business?
Lisa: If the business owner dies, it is a fairly clear situation. The business goes through probate the same way as any other assets that are in the deceased person’s name. It depends if the person has a will, depending on what state they are residing in. If they don't have a will, it would follow what is spelled out in the state probate laws. Normally this would be the spouse, but it depends on the state. Then whoever the new owner is after you've gone through all of this court process would name the person who would be the manager. But quite frankly, by the time you get through all of that, the business normally isn't worth much because no one has been taking care of it for a few months.
If it's a case of someone being incapacitated, say someone is in the hospital or otherwise no longer able to take care of things, the only way that you can get somebody else name on there is by going to court and having somebody named to take care of that person’s role in the business. Some operating agreements will say that if somebody has power of attorney, then the person named in that document can serve as the manager. This ends up taking less time than probate but is much more expensive and depending on the state, it's not always actually a plausible way to go.
Something else that's really important for people to consider is that who's managing the business and who owns the business can be different people.
I have a lot of clients who might name their children or their spouse as the next owners in line. But if their spouse is serving in the military and not around or if the child is a minor, obviously they can't really be the manager. You can have somebody else other than a family member as the manager.
Bottom line: you really want to name someone yourself initially, which takes no time.
Dawn: When filing for your LLC or similar formation, there is a part of your form that asks for a manager? Is that where you would recommend they designate someone so that they don't have to pay money and go through the court system to appoint someone? Or where would they go to do what you're suggesting?
Lisa: I'm only licensed in Massachusetts and Rhode Island, so I can’t speak for all states. In Massachusetts, filing for the LLC with the Secretary of the Commonwealth is not enough to be fully formed and really protected. You need to have an operating agreement in place. That operating agreement is where I put the emergency succession clauses that allow the person or persons who own the business to name people. It's a couple of documents that they complete. Based on that, I do the actual naming outside of the operating agreement so that my clients don't have to come back and pay me to change the operating agreement if they change their minds.
Dawn: So that's business succession. Are there other things to consider as far as estate planning and business ownership? Do you need to include your business in your will?
Lisa: So there's a couple of things that I specify for business owners. In Massachusetts and Rhode Island, we use trusts. We want to make sure that the member of the LLC is the trust and not the individual person; that way the business doesn't go through probate. But our (Massachusetts) probate process is a lot worse than other states. Some states are very easy.
People will say, ‘Why would you pay for a trust? Probate is easy enough.’ But either way, in a trust or a will, there is a special language that you include about a business. If you include that language, it is much more feasible for somebody to take over the business and manage it. If you don't include that language, then it's a much longer process time-wise.
Dawn: Are there estate planning lawyers that specialize in business then?
Lisa: I work in business law, tax law, and trust in Massachusetts. I let people know the legal and tax implications and how the business and the estate plan have to interact. The biggest issue that I see from people who go to different attorneys who only do business or only do estate planning is that the plans will be different between the two types of attorneys. That leads to problems. It can cause confusion on who is taking charge of what or which legal documents supersede another. The biggest thing is to make sure that it's all cohesive. There's a lot of coordination in it.
Dawn: That leads me to this question: what should small business owners look for in hiring an estate planning lawyer to talk about their business? Should it be somebody who has both areas in their practice, as you do, the business and the estate planning?
Lisa: It's good when you have somebody who does both. But by far, the most important thing when you’re picking either an estate planning attorney or business attorney is that you pick somebody that you trust and that you feel is a good fit for you.
Even if the estate planning attorney doesn't practice business law, check if they work with business owners and have a basic understanding of it. Tax is one of those areas that not a lot of attorneys practice, but taxes underlie both estate planning and business. You can interview an attorney and say, ‘I have a single-member LLC. I want X, Y, and Z for my estate plan. Do you have any recommendations on the tax implications of what I want or the best way to set this up in a tax manner?’ They can tell you if they are qualified to handle it or not. You either want to bring in somebody who understands taxes or find an attorney to do it. You can also have another professional advisor who can coordinate with your lawyer-that happens all the time with what we do.
Lisa Ann established Landry Law, PLLC with a goal of utilizing proactive planning in a comprehensive, comfortable manner in which clients can confidently make decisions in individualized plans based upon their unique situation and goals. She wanted to offer an alternative to the often intimidating manner of traditional legal practice, designed around a “standard” client and goal, and establish a practice where all are welcome and supported.
Lisa Ann grew up around business owners and tax and thought she might be interested in working with businesses in a different way. Attending Bentley University, her love of working with businesses grew, as did her interest in working with people around the world. During her time at Boston University School of Law, Lisa Ann studied at Bucerius Law School in Hamburg, Germany in a program focused on international business law. From her first job out of law school, she has focused on her selected practice areas and the overlap between them.
Licensed in Massachusetts and Rhode Island, Lisa Ann works with clients worldwide on trusts and estates, tax, and business law, which includes estate planning, trusts, probate administration, trust administration, tax planning, business establishment, business succession planning, ongoing business and tax advice, and more. Removing as many overwhelming, frightening, and daunting aspects of the client experience as she can, Lisa Ann enjoys the complexities that come in truly individualized legal work and in making the planning and administration accessible to all, including nontraditional clients. By focusing on often underserved communities with complex yet often misunderstood legal needs, Lisa Ann is able to use her skills to work with a variety of clients in areas including multijurisdictional work, special needs planning, childfree planning, nontraditional households, high net worth planning, nontraditional families, minors planning, business owner planning, charitable planning, people who move often, and more.
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Dawn Torres-Gale is an Accredited Financial Counselor® and the Single Owner-Member of Our Money Goals, LLC. Our Money Goals mission is to help individuals and couples build their household assets through the identification of specific financial goals and the creation of detailed action plans in support of those goals.
In 2008 Ms. Torres-Gale was chosen by the Financial Industry Regulatory Authority (FINRA) Foundation to be part of a select group of military spouses who received FINRA sponsored training from the Association of Financial Counseling, Planning and Education to become an Accredited Financial Counselor®. Ms. Torres-Gale received her certification as an Accredited Financial Counselor® in February 2012.
Since becoming an AFC®, Ms. Torres-Gale has worked as a Personal Financial Counselor with the Massachusetts National Guard and the Naval Operational Support Center in Portland, Oregon. In 2018 she spent three months providing financial education and counseling services to soldiers stationed at US Army Garrison Wiesbaden in Germany.
Ms. Torres-Gale has a Bachelor of Arts degree in Political Science from San Francisco State University and a Master of Public Administration degree from the University of Hawaii, Manoa. Ms. Torres-Gale has served as a district court mediator in Honolulu, Hawaii from 2003-2005 and as an elected member of the Wachusett Regional School Committee representing the Town of Holden, Massachusetts from 2009-2012. She is the spouse of LCDR Christopher A. Gale, USCG (Ret.) and the mother of three daughters, ages 28, 18 and 15 yrs. old.
