Learn Important Probate Essentials, including key things that go wrong in an estate, how to prevent them, and what to do if they happen.
Today’s probate law question comes from Atlanta, Georgia. What happens when a business is started by a father and son, the father dies, but the business documents are not clear about whether the son owns any part of the business? To make things more complicated, the father has other children. Does the business get split up?
This can be a very difficult situation to unravel. Georgia probate lawyer Erik Broel provides some insight about this complicated set of facts.
Under Georgia probate law, when the owner of a business dies, the deceased’s ownership interest in the business becomes a part of the deceased’s estate. This is true regardless of whether the company was structured as a corporation or limited liability company (LLC). The one main exception to this rule is that if there was more than one owner and the owners had a buy/sell agreement, then the interest that the deceased had in the business may not go into the estate depending on how the buy/sell is set up.
Once the ownership interest in the business becomes a part of the deceased’s estate, that interest will be dealt with in the same manner as any other property. So, if there is a will, then the will determines what happens. If there is no will, then Georgia probate law will determine how the property is split up.
One interesting twist to this situation is that the son may actually have some ownership interest in the business. Whether he does or not involves looking to the specific circumstances surrounding the creation of the business, the son’s and father’s actions during the life of the business, and the corporate documents (if any) governing the business. For example, when the business was started, if the son provided funding, materials, initial inventory, or equipment, then he may have a claim as an owner. In addition, if the son and the father voted on actions, if the son received profits from the business, or otherwise was treated like an owner, then the son may have some ownership interest. Whether the son has any ownership and how much he has requires an analysis of the above factors along with others. Many small business owners do not set up the corporate documents the right way, and that can cause a lot of heartache in situation such as this. The good news is that the corporate documents are not always the end of the question.
If it turns out that the son does have some ownership in the company, then the part the son owns would not be a part of the father’s estate – only the part that the father owns would go through probate.
As you can imagine, this is a very complex situation. If these circumstances sound familiar, I would encourage you to seek the assistance of a good probate attorney familiar with these matters to help you. The things mentioned above are some, but not all, of the factors that go into this type of analysis. Contact us for a free consultation.
Disclaimer: The information above is provided for general information only and should not be considered legal advice. Our probate lawyers provide legal advice to our clients after talking about the specific circumstances of the client’s situation. Our law firm cannot give you legal advice unless we undertsand your situation by talking with you. Please contact our law office to receive specific information about your situation.
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