Many participants of the Great Resignation decided to not only leave their jobs, but to also start their own businesses. Business startups surged 53 percent last year to 5.4 million, the highest number on record of any year. These new business owners need help with legal documents and business planning, providing attorneys with a new source of clients. Even if estate planning is your focus, understanding how to help new and aspiring business owners can grow your practice. Keep reading to learn more about how to reach and serve these potential clients.
Ask Probing Questions
When speaking with your clients about their assets and employment, ask if they generate income through a hobby or side hustle, because they might not mention it. They may not realize the earning potential of something they do for fun or to earn some extra dollars. Side jobs can sometimes grow into full-fledged businesses. Some surprisingly lucrative activities include
- consulting or personal coaching;
- renting out a home or car;
- real estate investments;
- selling products online or drop-shipping;
- a YouTube channel;
- sponsorships as a social media influencer;
- services such as child care or dog walking; and
- freelance work as a writer, graphic designer, or social media expert.
Once you have established that your client owns a business or may start one soon, your next step is to discuss the business’s legal structure. Your client can form a business in a few different ways. The most common options are
- sole proprietorship,
- limited liability company,
- corporation, or
- partnership.
If your client has registered the business, inquire about any other owners. Also ask your clients which business formation documents they have in place, if any. To form the entity, they will likely have articles of incorporation, which are documents that must be filed with the state to officially create the business; however, there are a few other important documents that clients should have, such as
- limited liability company operating agreement, which includes regulations customized for this particular business type;
- buy-sell agreements, which discuss what will happen to the business when the owner wants to sell it or retire; and
- bylaws, which specify the rules, responsibilities, and hierarchy of a corporation.
Identify Legal Pitfalls
As an estate planning attorney, you are uniquely qualified to help your clients avoid costly mistakes. This expertise can extend to clients who own businesses. Here are some of the mistakes you can help them avoid falling victim to.
Mistakes in Business Formation
Your client may have chosen the wrong type of entity, or the business may have changed so much since its inception that it would be better classified as a different type of entity. For example, most sole proprietorships can and should become an entity with limited liability, so you may be able to advise your client to form a limited liability company.
Failure to Consistently Keep Documentation
The business may not have accurate records going back to its founding, especially if it started as a hobby or side hustle. You can point out which documents are needed to ensure that the business does not violate state and local laws. These documents may include proper resolutions or meeting minutes to show how decisions were made.
Inadequate Risk Management
Businesses are founded on optimism, so your client may not be thinking about everything that could go wrong. You can advise clients about types of business insurance coverage and help them avoid potential claims involving employment contracts, arbitration provisions, and nondisclosure agreements.
Inadequate Succession Planning
The last thing a business owner thinks about when starting a company is stepping down from the company. Business succession planning is important from the outset, and it coincides with estate planning as to who would take over if the client becomes incapacitated, retires, or dies. You can help clients avoid problems by helping them draft a buy-sell agreement and working with them over the years to realize their goals for the legacy of their business.
Help Your Client Build a Legacy
Business ownership can become an important part of your client’s identity. You can help clients set their business up for success in the same way you can serve them as an estate planner. The pandemic awakened many people to the reality that they must chase their entrepreneurial dreams now, not after they retire. When you show your clients how much value you and your practice can offer, they are more likely to trust you and refer you to others as an outstanding estate planner and business adviser.
WealthCounsel’s Business Docx®, a cloud-based document drafting software, has everything you need to accurately and efficiently draft business documents for your clients. Download our document list to see all of the planning options available in Business Docx.
