2 Property Planning Questions for Enterprise Homeowners – New York Property Planning Lawyer Weblog – Apr 12, 2021

Entrepreneurs lived hectic lives. Understandably, some things are delayed on the business owner’s to-do lists. However, estate planning should not be postponed. Not only is estate planning crucial for business owners, but there are also some unique issues that arise. This article covers just a few of the unique and nuanced topics that business owners often need to consider when planning their estate.

# 1 – Accidental change of ownership of the PPP borrower

To respond to the adverse economic effects of the COVID-19 pandemic, the CARES Act was incorporated into the law in March 2020. As part of its implementation, the Small Business Administration and Treasury Department implemented the PPP program to allow lenders to both small and medium-sized businesses borrow money to maintain their payroll and hire workers who have been laid off to cover overhead costs. These loans are granted provided the proceeds are used in accordance with applicable law.

An unresolved question is whether there is a change of ownership for a PPP borrower under SBA guidelines who, if the lender or the small business administration disagree, could forego the forgiveness aspect of a PPP loan. The Small Business Administration Guidelines define a change of ownership when at least 20 percent of the common stock or other ownership interest in a borrower is sold or otherwise transferred, including to an affiliate or an existing owner of the company.

This definition includes gifts from parents to trusts for the benefit of children or other beneficiaries.

Even if such transfers are permitted under applicable documents, Small Business Administration policies are unlikely to allow such transfers if the transfer is at least 20 percent of the interest in the PPP borrower. If such an interest rate threshold is either met or exceeded and the PPP loan has not been fully extended, it is important that both the applicable PPP loan document and the Small Business Administration guidelines are met.

# 2 – Unintentional liquidation of an estate

One of the most common questions when managing a deceased person’s estate is whether the deceased has an interest in a business. If the deceased was the sole owner of a New York State LLC, an individual must review the LLC’s operating agreement. Under Section 701 (a) (4) of the LLCLA New York State Limited Company will be dissolved and its business will be closed whenever no members are present unless the legal representative of the last remaining member formally agrees to continue the LLC and the legal representative of the NY LLC as a member within 180 days of the occurrence of the event that ended the continued membership of the last remaining member.

New York law allows NY LLC’s company agreement to be more flexible than statutory default by allowing the company agreement to change both the 180-day period and the statutory termination requirement.

Therefore, it is important to inquire about property ownership and review the operating agreement as soon as possible to determine where time sensitive matters are. While the dissolution of a company that is the sole member of a NY LLC could also trigger this provision, the possible dissolution under NY LLC 701 (a) (4) occurs upon the death of a person who was the sole member of a New York GmbH.

Get help from an estate planning attorney

Estate planning is critical to taking control of situations where a loved one dies unexpectedly or becomes incapacitated, but many people still fail to prepare adequate estate planning. If you or your loved ones need the assistance of an estate planning attorney, please contact Law firm Ettinger today to schedule a free case assessment.