The small business owner must consider numerous legal issues before starting business operations if he or she is seeking to effectively limit liability in the business structure. One issue particularly worthy of some discussion is securities law, as it affects the issuance of interests in the limited liability company (LLC) and corporation.

When executing estate planning strategies, the result of transfers to children will often be income-splitting that lowers the family's income taxes. Traditionally, income in a limited liability company (LLC) is divided according to the relative balance in the owners' capital accounts. Because the children will own much, or nearly all, of the business, according to the capital accounts, most of the income would be attributable to the children, if this traditional allocation scheme is used.

John owns a limited liability company (LLC) with a value of $600,000 (value of assets less liabilities). He wants to avoid the estate tax, as he knows the value of his business, and his other assets, will steadily increase above his exemption amount. John owns 100 percent of the business, represented by ownership of one share as a member/manager, and nine shares as a member/non-manager.

Other, more advanced estate planning strategies exist that allow transfers of business interests to the family to be made, without reducing the gift tax exemption.

If you are seeking to transfer business interests to the family, you may encounter complexities if your business is a corporation.

As an alternative to outright transfers of the business interests to the family, the $12,000 annual gift exclusion in 2008 ($13,000 in 2009) provides a simple opportunity to pass on wealth. The exclusion is now indexed to the rate of inflation, and lifetime annual gifts that qualify under this exclusion do not reduce the estate or gift tax exemptions.

Now that we've discussed the entity form (the family limited liability company) best suited for transferring business interests to the family, it's time to explain how best to make those transfers.

Many different estate planning strategies can be used to eliminate or, at the very least, significantly reduce estate taxes, ensuring the family's wealth is passed on to the next generation. One such strategy involves transferring business interests to the family through the use of a limited partnership (LP) or a limited liability company (LLC). Parents transfer to their children "discounted" shares in their LP or LLC, without giving up control of the business.

Even with the allowable exemptions and exceptions available to you when planning for federal estate taxes, there is the real possibility that the remaining assets will be taxed at very high rates. To legally avoid this outcome, a number of strategies have been developed over the years that will allow you to pass on wealth to your family.

The estate tax reform of 2001 made significant changes to the tax basis of gift or inheritance assets when they are later sold.

When estate taxes were reformed in 2001, the divergence of the estate tax and the gift tax presented new opportunities.

Many aspects of the federal estate and gift tax were changed by recent reform measures passed by Congress. This major tax legislation includes a phase-out of the federal estate tax over a 10-year period, as well as major changes to the gift tax and carryover basis rules for inherited assets.

Once upon a time, before estate tax reform in 2001, one of the basic tenets of estate taxation was a special consideration for small businesses.

Among the basic tenets of estate taxation, this exclusion allows unique opportunities to pass on wealth tax-free.

Among the basic tenets of estate taxation, these exemptions allow, as of the year 2008, every individual to transfer a total of $2 million during lifetime or at death, free of estate and gift taxes ($3.5 million in 2009).

Among the basic tenets of estate taxation, this deduction allows an individual to give during life, or at death, an unlimited amount to a spouse, free of estate and gift taxes. This is termed the "unlimited marital deduction" and is separate from the regular "unified" exemption or the new "gift" exemption.

Planning for federal estate taxes is a very complex subject, and anyone hoping to successfully shield hard-earned life-long earnings from the tax collector should consult a professional in this area.

When seeking to limit liability in the business structure, the small business owner must be aware of estate planning issues when forming a business, as these considerations can have important implications when initially establishing the business. Proper initial business formation can save hundreds of thousands of dollars in estate taxes in later years.

When choosing a state in which to form your business entity, you need to weigh the relative advantages and disadvantages of the laws in certain states.

When choosing a state in which to form your business entity, you need to weigh the relative advantages and disadvantages of the laws in certain states.

When choosing a state in which to form your business entity, you need to weigh the relative advantages and disadvantages of the laws in certain states.

When choosing a state in which to form your business entity, you need to weigh the relative advantages and disadvantages of the laws in certain states.

When choosing a state in which to form your business entity, you need to weigh the relative advantages and disadvantages of the laws in certain states.

When choosing a state in which to form your business entity, you need to weigh the relative advantages and disadvantages of the laws in certain states.

When choosing a state for your business entity, state fees should not always be the only, or even the main, consideration.