One of the most useful corporate forms in use today is the Limited Liability Company, or LLC. Whether due its ease of formation in New Hampshire and most other states, its relatively straight-forward tax rules, or the liability protections it affords its owners, the LLC has truly become widespread among business owners today.
Quite often, an LLC is used by people to own rental properties or small businesses. While their LLC’s own these assets, the individuals, in many situations, can protect their own assets from claims against the business.
Like any other asset, however, an LLC’s assets are still potentially subject to probate in certain situations. That means that, unless you make the proper arrangements, your LLC interest and assets could be tied up in a long and expensive court process before they can be passed on to your children. How then can we protect LLC assets from probate?
One popular strategy is to transfer the ownership of your LLC to a revocable trust. Under New Hampshire law, a trust is permitted to be a member of an LLC and to hold an interest in an LLC as a regular person would. In this case, the LLC would hold the title to the property or business as you originally set it up. Your LLC ownership interest is then held by your revocable trust. That trust, finally, contains your instructions for how and when your LLC assets are passed on to your children or other beneficiaries. The best part about this is that assets owned by your trust do not need to go through probate and can be distributed how and when you want them to be.
But how does the trust owning my LLC change my business while I am alive, you may ask? The short answer is – for all practical purposes – it doesn’t. If you are the sole owner of your LLC, that does not change in practice while you are alive – you still own the LLC and manage it as you would normally, but you own it as a trustee acting on behalf of your trust.
In this way, your LLC protects your assets during your life, and your trust protects your assets after your death.
If you own an LLC and want to discuss how to best protect your assets in this life or the next, the attorneys at Curtin Law Office are here to help. Call and make your appointment today.