Protect your California small business with succession planning. Transfer LLC, S-Corp, or partnership interests to trust. Avoid business disruption during probate. Ensure smooth transition to family or key employees. Attorney-prepared for entrepreneurs. $400-$500.
If you own a small business in California—whether LLC, S-Corporation, partnership, or sole proprietorship—your business is likely your largest asset. Without proper succession planning, your death triggers business probate, freezing operations for 12-18 months and potentially destroying the value you've built. A living trust for small business California protects your company and your family.
How to transfer: Execute an LLC Assignment transferring your membership interest from your individual name to your trust. File with your LLC records (not public filing). Update your LLC operating agreement to reflect the trust as member.
Tax implications: None. Single-member LLC owned by revocable trust continues as disregarded entity, taxed on your personal return. No change to tax status or EIN.
Operation: Sign LLC documents as "[Your Name], Trustee" instead of individual capacity. All authority and control remain with you.
How to transfer: Execute a stock assignment transferring your S-Corp shares to your trust. Update corporate stock ledger. Your trust must qualify as eligible S-Corp shareholder (revocable living trusts qualify).
Tax implications: None. Your revocable trust is a "grantor trust" treated as disregarded for tax purposes. S-Corp election continues unchanged.
Important: S-Corps have strict shareholder restrictions. Revocable living trusts ARE allowed as S-Corp shareholders, but irrevocable trusts may terminate S-Corp status. Consult your tax advisor.
How to transfer: Check your partnership agreement first—some require partner approval for transfers. Execute an assignment of partnership interest to your trust. Notify other partners.
Tax implications: None for revocable trust. Partnership K-1 reports to you (grantor of trust) as before.
Partner approval: Most partnership agreements allow transfer to your own revocable trust without other partners' consent (unlike transfers to third parties).
How to transfer: A sole proprietorship has no separate legal existence—it's just you doing business. Transfer the business ASSETS to your trust: equipment, inventory, accounts receivable, intellectual property, business real estate.
Consider converting: Many sole proprietors convert to LLC before transferring to trust. This provides liability protection AND easier succession planning. An LLC owned by your trust is simpler than transferring individual business assets.
Tax implications: None. Continue filing Schedule C on your personal return.
Your trust specifies that business ownership transfers to your children, spouse, or other family members. Your successor trustee ensures smooth transition. Family members can continue operating the business or hire professional management.
Your trust authorizes your successor trustee to sell the business to key employees or co-owners at fair market value. Often combined with buy-sell agreement funded by life insurance—employees buy you out, life insurance provides cash.
Your trust directs your successor trustee to wind down and sell the business assets. Better than forced probate sale—trustee can take time to find buyers, negotiate favorable terms, maximize value for your family.
Your trust continues owning the business, hiring professional management to run operations. Business profits flow to your family (through the trust) as ongoing income. Preserves the business as income-producing asset rather than liquidating.
Yes. Execute an LLC membership interest assignment transferring ownership from yourself individually to yourself as trustee of your trust. Update your LLC operating agreement. File the assignment with your LLC records. No public filing required. No tax implications—your LLC continues as before.
No. A revocable living trust is tax-neutral (disregarded entity). Your business continues filing taxes exactly as before using your SSN. S-Corps maintain S-election. LLCs maintain pass-through status. Partnerships continue K-1 reporting. Nothing changes for tax purposes during your lifetime.
Check your operating agreement or shareholder agreement. Most allow transfer of your ownership interest to your own revocable trust without partner approval. Your partners' interests are unaffected. When you die, your successor trustee steps into your role as member/shareholder, or sells your interest per your succession plan. Consider a buy-sell agreement with partners funded by life insurance.
Yes, if your business is in your living trust. Your successor trustee steps in immediately to manage operations, sign contracts, access bank accounts, make decisions. Without a trust, your family must petition for conservatorship before they can manage the business—this can take months and cost $10,000-$15,000, during which the business may fail.
For simple businesses (solo LLC, small family business), a living trust with clear succession instructions is sufficient. For complex businesses (multiple partners, key employees, significant value), you may also want a buy-sell agreement, key person life insurance, and detailed operational succession plan. The living trust is the foundation—it avoids probate and provides immediate authority to your successor trustee.
Avoid business probate. Ensure smooth succession. Preserve business value. Protect your family's income. Attorney-prepared living trust for California entrepreneurs and small business owners.
Attorney-Reviewed | 25+ Years Experience | California State Bar #208356