Estate Planning for Business Owners

Reviewed by Turner Henington, attorney, Texas Bar No. 24148206 · Updated October 2026

Business owners often have the least planning and the most at stake. The company agreement was a template, the shares are in your name alone, and the only person who knows the passwords, the bank contacts and the key customers is you. Henington Lewis Law Firm PLLC works with business owners in Austin and Travis, Williamson and Hays Counties to tie the business into the estate plan so it can keep operating, and be kept, sold or handed down, without a court.

What Happens to Your Business If You Die or Become Incapacitated?

The Parts of a Business Owner’s Estate Plan

• Revocable living trust holding your business interests. An assignment moves your LLC interest or shares into the trust, so they pass without probate and your successor trustee can step in immediately.
• Updated company agreement or bylaws. Successor members and managers, transfer restrictions, and what happens on death, disability, divorce or departure.
• Buy-sell agreement. Who buys an owner’s interest, at what price or by what valuation method, and on what payment terms. Section 101.1115(b) confirms these agreements remain enforceable.
• Insurance to fund the buyout. Life and disability insurance can give co-owners or the business the cash to buy out your family, so your family gets money instead of a minority interest.
• Durable power of attorney with business powers. Lets someone you trust run things while you can’t.
• A written succession plan. Who runs the business, who owns it, and whether it is kept, sold or wound down. This is often separate from who inherits its value.
• An instructions binder. Banks, accountants, key customers, vendors, passwords and where the documents are.

Running vs. Owning: Treating Your Children Fairly

One child may work in the business while the others don’t. Fair doesn’t have to mean equal shares of the company. Common approaches:

• Leave the business to the child who runs it and equalize with other assets or life insurance.
• Give voting control to the active child and non-voting interests to the others.
• Let the active child buy the business from the estate or trust over time.
• Have the trust sell the business and divide the proceeds.

Tax Issues for Business Owners

• Estate tax: The federal exemption is $15 million per person in 2026. Business owners near that number should plan early, since a business can grow quickly and is hard to sell to pay a tax bill.
• Paying estate tax over time: If a closely held business makes up a large part of an estate, federal law can allow the estate tax on it to be paid in installments over many years (Internal Revenue Code § 6166).
• Step-up in basis: Business interests owned at death generally get a new cost basis, which can reduce capital gains tax if your heirs sell.
• S corporations: Only certain trusts can own S corporation shares. A revocable trust can hold them during your life, but after your death the trust must qualify under special rules within a limited time. We draft for this.
• Lifetime transfers: Gifting interests in the business, sometimes at a discount for lack of control or marketability, can move future growth out of your estate. We coordinate with your CPA.

Protecting the Business From Lawsuits and Creditors

An LLC protects your personal assets from the business’s debts if it is set up and run properly. A trust does not protect against lawsuits by itself, but your plan can protect what your children inherit from the business, through Heritage Trusts that shield it from their divorce and creditors. See also our asset protection page.

Who Will Prepare Your Plan

Turner Henington and Samantha Lewis founded Henington Lewis Law Firm, and one of them works on every plan we write. Turner is a former KPMG tax accountant and a graduate of The University of Texas School of Law, which helps when a plan involves entity structure, S corporation rules or estate tax. Samantha has nearly a decade of experience in Texas and federal courts and handles business and estate disputes, so she drafts with an eye to how plans get challenged. Our office is at 1101 S. Capital of Texas Hwy, Bldg G, Suite 150-C, near West Lake Hills, and we also meet by phone and Zoom.

What Our Clients Say

Estate Planning for Business Owners FAQ

What happens to my LLC when I die in Texas?

Under Texas Business Organizations Code § 101.1115, your heirs, estate or successor become assignees of your membership interest. They receive the economic rights but don’t become members with a vote unless the company agreement allows it. Assigning your interest to a trust and naming a successor in the company agreement avoids that gap.

Should my LLC be owned by my living trust?

Usually, yes. Assigning your membership interest to your revocable trust lets it pass without probate and lets your successor trustee act immediately. Check your company agreement for transfer restrictions first.

What is a buy-sell agreement?

A contract among business owners that says who buys an owner’s interest if they die, become disabled, divorce or leave, how the price is set and how it is paid. It is often funded with life insurance.

What is business succession planning?

Planning for who will run and who will own your business when you retire, become incapacitated or die. It includes company documents, a buy-sell agreement, a trust, powers of attorney and a written plan for management.

Can a trust own S corporation stock?

Yes, but only certain kinds of trusts. A revocable living trust can hold S corporation shares during your life. After your death, the trust must meet special requirements within a limited time to keep the S election. We draft trusts to handle this.

How do I leave my business to one child and treat the others fairly?

Common approaches include equalizing with other assets or life insurance, giving voting control to the active child and non-voting interests to the others, or letting the active child buy the business over time.

What happens to my business if I become incapacitated?

Unless someone has authority, bills, payroll and contracts can stall. A durable power of attorney with business powers, and a company agreement naming a successor manager, let someone step in without a court.

Will my business owe estate tax?

Only if your total estate exceeds the federal exemption, $15 million per person in 2026. Texas has no estate tax. If your business is a large share of a taxable estate, federal law may allow the tax to be paid in installments.

How much does a business owner’s estate plan cost?

Every plan is a flat fee, quoted in writing after a free consultation. Company agreement updates and buy-sell agreements can be included in the quote.

Sources and Texas Law Cited

The legal and tax statements on this page are based on the primary sources below. Laws and figures change, and this page was last reviewed in October 2026. This page is general information, not legal advice for your situation.

• Texas Business Organizations Code § 101.1115 – Effect of death or divorce on LLC membership interest
• Texas Business Organizations Code § 101.601 – Series LLCs
• 26 U.S.C. § 6166 – Installment payment of estate tax for closely held businesses
• 26 U.S.C. § 1361 – S corporation shareholders, including trusts
• 26 U.S.C. § 1014 – Basis of property acquired from a decedent (including § 1014(b)(6) for community property)
• IRS Rev. Proc. 2025-32 – 2026 estate, gift and GST exemption ($15 million) and annual exclusion ($19,000)

Keep Reading

• Estate Planning for Real Estate Investors
• Protecting Your Children’s Inheritance
• Estate Planning for Married Couples
• Family Business Succession Planning in Texas
• Estate Planning for Multiple Property Owners
• What Assets Should Be Placed in a Trust?
• Austin Asset Protection Lawyer
• Austin Estate Planning Attorney
• Estate Planning for Every Stage of Life