What Happens When a Business Owner Dies?
The business entity type determines what happens to the business ownership interests when the owner dies; depending on the business structure, it could cease to exist, pass to the estate, or pass to a successor beneficiary according to the company’s organizing documents.
How simple or complex your estate plan will be depends as much on the type of assets you own as it does on the value of those assets. If your wealth is in the form of a family home and bank accounts, then you can keep most of your assets out of probate by executing a ladybird deed and assigning payable upon-death beneficiaries for your accounts. If you own valuable jewelry and artwork, you can make probate a lot simpler by organizing the documents related to the authenticity and appraised value of these items. If you own a business, either alone or jointly with partners, then what will happen to your business interest after you die varies according to the business structure, and you should outline your plans in the foundational documents of the business itself, as well as in your will. For help planning the future of your business into the next generations, contact a St. Petersburg estate planning lawyer.
Inheritance of Business Ownership Interests by Entity Type
A business is an entity. When you create a business, you must choose what type of entity the business will be. The entity type determines which other documents you need, your tax obligations, and the procedures for dissolving the company or removing partners from it. It also determines what happens to the business when one of the owners dies. Here is what happens to various business entities upon the death of an owner:
- Sole proprietorship – The business ceases to exist. Its assets and debts become part of the estate, to be paid and distributed during probate.
- S corporation – The business continues to exist after the owner’s death, and it becomes part of the estate. If the business owner left a will, then the beneficiary or beneficiaries listed in the will inherit the business when probate finishes. If the business owner did not leave a will, then the business passes on to the business owner’s closest surviving relatives, pursuant to the laws of intestate succession.
- Other business structures – A limited liability corporation (LLC) should have an operating agreement. A partnership, limited partnership, or limited liability partnership should have a partnership agreement. These documents should specify what happens to a partner or LLC member’s ownership interests when that partner or member dies.
If you are not experienced in entrepreneurship, and you are the personal representative of an estate involving business interests, or if you have inherited business interests, it is a good idea to consult a lawyer.
Contact Kruse Law About the Inheritance of Business Interests in Florida
A St. Petersburg estate planning lawyer can assist with creating a business succession plan to ensure that things go as smoothly as possible when the time comes. Contact Kruse Law in St. Petersburg, Florida, to set up a consultation.