Estate Planning for Small Business Owners in Broward County
A small business is often a family's largest asset — and the hardest to transfer at death without proper planning. For Broward County business owners, business succession planning and personal estate planning must work together.
Quick Answer
Small business owners in Broward County face estate planning challenges that go beyond the standard will and trust. The core issue is that a business interest cannot simply be divided like a bank account — it has operational continuity requirements, valuation complexities, and often co-owners whose rights are affected by what happens at a partner's death. The essential business succession planning tools include a buy-sell agreement (a contract among co-owners that controls what happens to a business interest when an owner dies, becomes disabled, or wants to exit), key person life insurance (coverage on the owner whose death would most affect business operations), and succession provisions in the LLC operating agreement or shareholder agreement that prevent the business from passing to heirs who are not equipped or permitted to be owners. On the personal side, business owners need their estate plan to address how the business interest is valued for estate purposes, how estate tax (if applicable) is paid without forcing a business sale, and how family members who are not in the business are treated fairly alongside those who are.
Broward County is home to tens of thousands of small businesses — from professional service firms in Fort Lauderdale to construction companies in Davie, medical practices in Pembroke Pines to retail operations in Plantation. For most of these owners, the business is not just a source of income — it is the primary asset of the family's estate.
Yet business succession planning remains one of the most neglected areas of estate planning. Many business owners who have wills have never addressed what specifically happens to the business at death, disability, or departure.
The Problem: A Business Is Not Liquid
A bank account can be divided among heirs exactly. A business cannot. If you die with a 50% interest in a construction company, your heirs do not automatically receive cash. They receive an ownership interest in an operating business — one that may have co-owners who did not want new partners, employees who depend on management continuity, contracts that require personal involvement, and a value that depends on someone continuing to show up.
Without a plan, the result can be:
Buy-Sell Agreement: The Foundation of Business Succession
A buy-sell agreement is a contract among business co-owners (or between the business and its owners) that establishes what happens when a triggering event occurs — death, disability, retirement, or a desire to sell.
A well-drafted buy-sell agreement answers these questions:
- Who can buy the departing owner's interest? (Other owners? The business itself? An approved outside buyer?)
- At what price? (Fair market value, book value, formula, appraisal?)
- How is the purchase funded? (Life insurance? Installment payments? Business cash flow?)
- What triggers the buyout? (Death only? Disability? Retirement? Voluntary exit?)
The most common funding mechanism for death-triggered buyouts is life insurance. Each co-owner is insured for an amount sufficient to buy out their interest, with proceeds going to the surviving owners or the business to fund the purchase.
Without a buy-sell agreement, the default rules (state law and whatever is in the operating agreement) apply — and they rarely produce the outcome anyone intended.
LLC Operating Agreement Succession Provisions
Most Florida small businesses operate as LLCs. The LLC operating agreement controls what happens to membership interests at death. Default Florida LLC law (F.S. Chapter 605) gives heirs of a deceased member only the right to receive economic distributions — not management rights — unless the operating agreement says otherwise.
For single-member LLCs, the operating agreement should designate a successor member who takes over management and ownership at death. Without this provision, the membership interest passes through the owner's estate and is subject to probate administration — during which the business may be in operational limbo.
For multi-member LLCs, the operating agreement should be coordinated with the buy-sell agreement to ensure consistent rules about who can become a member and on what terms.
S-Corporation Issues
S-corporations have strict ownership restrictions. Not all trusts qualify as S-corp shareholders — only specific trust types (revocable trusts, QSSTs, ESOPs, and a few others) can hold S-corp stock without terminating the S-election.
If you own S-corp stock and your estate plan includes a revocable living trust, the trust must be reviewed to confirm it qualifies as a permitted S-corp shareholder. An inadvertent termination of S-corp status can have significant tax consequences.
Valuation and Estate Tax
At death, your business interest is included in your taxable estate at its fair market value. For many business owners, this value exceeds the value of all personal assets combined.
For estates above the federal exemption ($13.61 million in 2024, scheduled to drop after 2025), estate tax at up to 40% applies to the excess. Several tax planning strategies are specifically designed for business owners:
Valuation discounts: A minority interest in a closely-held business is typically valued at a discount to its proportionate share of the whole business, reflecting lack of control and lack of marketability. These discounts are legally recognized and can significantly reduce estate value.
Section 6166 deferral: Estates that include a closely-held business interest may qualify to defer estate tax payments on the business portion over up to 14 years, preventing a forced sale to pay taxes.
Family Limited Partnerships / FLPs: Transfer business interests to family members over time at discounted values while retaining control.
Key Person Life Insurance
Key person insurance covers the business against the financial loss caused by the death or disability of an owner or essential employee whose contributions drive significant revenue. The policy is owned and paid for by the business, with the business as beneficiary.
Key person coverage serves a different purpose than buy-sell insurance: it provides the business with operating capital to weather the loss, hire replacements, and reassure clients and lenders during a transition period.
Integrating Business and Personal Planning
For a Broward County business owner, the complete picture includes:
| Personal | Business | |---|---| | Revocable living trust (holds business interest) | Buy-sell agreement (funded with life insurance) | | Will with business interest provisions | LLC/corporate succession provisions | | DPOA with business management authority | Key person insurance | | Beneficiary designations on retirement accounts | Valuation discount strategies | | Family equalization for non-business heirs | S-corp trust qualification review |
Frequently Asked Questions
My spouse is not involved in the business. How do I leave them provided for without giving them the business? A common solution is life insurance or a QTIP trust funded with other assets, while the business interest passes to the children or partners who are involved. Equalizing among heirs through other assets is a core part of business succession planning.
I'm the sole owner. What happens to my business if I die without a plan? The business interest passes through your estate. During probate, your personal representative has authority to manage or wind down the business, but this process is supervised by the court and can be slow. A well-drafted trust and operating agreement allow a designated successor to step in immediately without court involvement.
Should the business interest be in my revocable trust? Often yes — it allows the successor trustee to manage the interest without probate delay. However, if the business is an S-corporation, the trust must be a qualifying trust, and if there is a buy-sell agreement, its terms must be coordinated with the trust.
How often should I update my business succession plan? When ownership percentages change, co-owners change, business value changes significantly, or key personnel change. Most business succession plans should be reviewed every 2–3 years as a minimum.
Contact Mark Mastrarrigo P.A. to develop a business succession plan that protects your family and your business. Our Cooper City office serves Broward County business owners throughout Fort Lauderdale, Davie, Weston, Plantation, and surrounding communities.