Comprehensive estate planning protects not only your family but also your business. Assignment of corporate interests requires special attention to safeguard the entity you’ve worked so hard to develop.

All businesses, regardless of size or maturity, need a viable plan of business succession. If you hold interests in a closely-held business, it is important to ensure that your plan for business succession coordinates with your personal estate plans. That becomes more complicated when the business is a California corporation, so it is crucial to work with an attorney who understands how to handle the complexities.

At Blacksburg Law, we take an inclusive approach to estate planning that covers the full range of our clients’ needs. Rather than trying to make your goals fit our documents, we start with your goals and build plans and documents to fulfill your objectives. We will work with you to determine the most effective assignment techniques and ensure that every step in the process is completed effectively to maintain the integrity and success of your enterprise.

What is Assignment of Corporate Interest?

In essence, an assignment of corporate interests is a plan to pass your interests of a corporation to another person. The assigning of your interests could occur due to your death or incapacity, or it could involve retirement from an active role in the business or a desire to concentrate assets elsewhere. Assigning interests in certain types of corporations is not as simple as assigning other types of assets such as vehicles or real estate. Often, corporations have established agreements among leaders that set limits on how shares or interests in the business can be passed to others.

It is important to assign corporate interests as part of the estate planning process to avoid putting both the business and your beneficiaries in a precarious position. Co-owners might be forced to work with someone unexpected, or the beneficiaries who inherited your interests might be forced to sell at less than full value. Your loved ones and the business you worked so hard to build will benefit from a thoughtful assignment of corporation included in your estate plans.

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    Assignment as Part of a Plan of Business Succession

    In most cases, assignment of corporate interests succeeds when it is part of a comprehensive business succession plan. Ideally, a management succession plan, at minimum, should be established at the time a business is created, but that seldom happens. At the very least, it is highly beneficial to have those involved in the leadership of the business sit down to consider terms for succession at a time when they are not under pressure—in other words, before the plan is needed. When a business is facing a crisis transition in leadership, it can be hard to think rationally about the long-term ramifications of decisions.  

    Different Ways Your Interests Can Be Assigned

    The type of corporation, any pre-existing agreements, and other factors will determine your options for assignment of corporate interests. In many situations, assignment of corporation is accomplished through a share transfer agreement. This document serves as a formal contract specifying the details of the transfer of shares or other interests in the corporation from one party to another. Your interests could be assigned to another individual, or to a trust or business entity. Share transfer agreements are flexible and can be set up to account for a variety of conditions such as a transfer on death provision. A share transfer agreement can keep ownership of the corporation within a set group, protecting continuity.  This type of agreement operates much as a buy-sell agreement but in compliance with corporate legal requirements.

    Corporate interests can also be assigned through a standard estate planning document such as a will or trust, if that type of transfer is allowed. It is important to work with an attorney who is familiar with business law as well as estate planning to ensure that business continuity and value are protected and that transactions meet all legal requirements. It is also critical to keep mindful of tax implications, establishing a method for valuing business interests, and other issues that can cause problems during and after the transition.

    Estate Planning Basics

    A START-UP GUIDE TO ESTATE PLANNING

    Download our Estate Planning Basics PDF Guide to get more information about what estate planning is, how it works, what you need to consider, and why Blacksburg Law is the right partner for you.

    Blacksburg Law Can Help with Assignment of Corporation and Business Succession to Protect Your Interests

    Establishing the right plans to pass corporate interests in California can be challenging, but your business deserves the protection that only a comprehensive plan can provide. At Blacksburg Law, we can develop a plan tailored to your goals and the specific details of your corporate structure. We can ensure that the assignment of corporation meets the requirements of existing agreements as well as California law.

    To discuss the ways we can safeguard your business interests, we invite you to schedule an appointment by contacting us online or calling 415.909.3677.

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