Estate Planning for Business Owners in New York

Running a business takes vision, persistence, and long hours, but what happens to everything you’ve built if something happens to you? For small business owners in New York, estate planning is not just about passing on personal assets; it is also about ensuring the continuity of their business. It’s about making sure your business and the people who depend on it are protected.

Whether you're a sole proprietor, part of a partnership, or managing an LLC, your estate plan needs to address succession, control, asset protection, and tax strategy. Without a plan, your business could end up in probate, experience costly delays, or even fall apart entirely.

Why Estate Planning Matters for Business Owners

When you own a business, your estate becomes more complex. Beyond your home and personal finances, your business interests must be addressed. If they’re not, you risk:

• Disruption of operations

• Family disputes or partner conflicts

• Loss of value or clients

• Probate delays affecting income or payroll

• Unintended tax consequences

Estate planning helps ensure that your business can continue, or be wrapped up responsibly, without creating stress or confusion for those you leave behind.

Entity Type Matters: LLCs, Partnerships, and Sole Proprietorships

LLCs (Limited Liability Companies)

In New York, LLCs are treated as separate legal entities; however, the structure of the LLC and the existence of an operating agreement are also important factors. Without a clear succession plan or transfer provision in the operating agreement, your ownership interest may be subject to probate.

• Add a Transfer Plan: Specify who inherits your membership interest and under what conditions.

• Avoid Probate: Consider placing your LLC interest into a trust for smoother transitions.

• Review Buy-Sell Agreements: These can determine how your stake is valued and sold.

Emotional Benefit: Avoiding probate means heirs can focus on grieving, not wrangling with the court.

Partnerships

In general partnerships or limited partnerships, the death of a partner can result in the dissolution of the business, unless otherwise stated in a written agreement.

• Have a Continuation Clause: This allows the remaining partners to continue operations.

• Spell Out Succession: Identify whether heirs can step into your role or must sell the interest.

• Plan for Buyouts: Create a funding strategy (e.g., life insurance) to support smooth transitions.

Emotional Benefit: Prevents misunderstandings among family members and surviving partners.

Sole Proprietorships

This is the most vulnerable structure. Because the business and the owner are legally the same, the company essentially comes to an end when the owner dies.

• Transfer Key Assets: Use a will or trust to pass tools, accounts, or licenses to the intended recipient.

• Document Operating Details: A business continuity plan helps family or staff wrap things up or continue operations.

Emotional Benefit: Reduces pressure on family members to “figure it out” during stressful times.

Planning Ahead: Protecting Your Business and Your Family

Use Trusts for Business Interests

Trusts can hold your business interests and dictate how they’re managed or distributed after your death. In New York, this helps avoid probate and keeps the business moving without interruption.

Appoint the Right Fiduciaries

Choose an executor or trustee who understands business or is willing to bring in professionals to assist them. You can also appoint a business advisor to help your executor.

Consider a Power of Attorney

A durable power of attorney ensures someone can legally act on your behalf if you become incapacitated, handling payroll, contracts, or legal issues.

Don’t Forget Taxes and Valuation

Estate taxes may apply depending on the size of your estate. Get a business valuation now so your heirs don’t face disputes or delays later.

Update on the One Big Beautiful Bill Act (OBBBA)

Under the newly signed OBBBA, key federal estate tax laws have changed:

• Lifetime Estate & Gift Tax Exemption: The current $13.99 million per person exemption remains in effect through 2025. Starting in 2026, this increases to $15 million per individual (or $30 million per married couple), indexed annually for inflation.

• Top Tax Rate Unchanged: The 40% estate and gift tax rate on amounts above the exemption remains the same.

• GST (Generation-Skipping Transfer) Tax Exemption: Now aligned with the estate/gift exemption—simplifying multigenerational planning.

These changes make it easier for business owners to transfer more wealth, reduce tax exposure, and plan with confidence.

Coordinate With Business Agreements

Ensure your estate plan aligns with your business documents. Conflicting instructions can lead to confusion, litigation, or delays.

Real-Life Example: The Family Business Without a Plan

A New York bakery owner passed away without a will or succession plan. The result? The business account was frozen, suppliers went unpaid, and a family dispute stalled probate for nearly a year. A clear estate plan could’ve kept the ovens running and the legacy alive.

Work With the Palermo Firm

At The Palermo Firm, we understand the unique challenges faced by business owners. We help clients across New York establish plans that protect both personal and business assets. Whether you're just starting or preparing for retirement, we’ll help you:

• Choose the right tools for your entity type

• Create a business succession plan

• Protect your family and employees from legal limbo

• Reduce probate delays and tax exposure

Call us at 516-262-4040, email contact@thepalermofirm.com, or reach out online. With offices in Plainview and Commack, we’re here to support you and your business every step of the way.