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Thursday, March 16, 2017

What Happens To My Business When I Die Without A Business Succession Plan?

When we are young and healthy, it usually doesn’t occur to us to prepare for life after we’re gone. While business succession planning may not be at the top of your list of things to do this week, a quick thought about how your family and valued clients will be affected once your gone might give you pause.

If you own a business, especially in a professional capacity, you have a duty to your clients to plan how your business will be handled once you pass. If you want to be remembered fondly when you’re gone, take some time to address your business succession plan.

What Happens To My Business When I Die?  

If you die without a business plan, then what happens after generally depends on the type of business structure you have.

Sole Proprietorship: When a sole proprietor dies, so does the sole proprietorship. The assets and liabilities must be used to pay debts as a part of the estate of the deceased. However, there might be the possibility for a trustee to work with a lawyer in order to continue operations.

Partnership: Partnerships are a different animal, and what happens to the business upon your death will typically be dealt with in your partnership agreement. If there is no partnership agreement, then the partnership dissolves upon your death. Smart partners will work with a lawyer to draw up an agreement that governs the steps in case a partner is incapacitated or dies.

Corporation: Unlike partnerships and sole proprietorships, corporations are separate entities and do not die when their owners die. Any shares that are held will either become the property of the estate, or depending on the shareholder agreement, could revert back to the corporation or be bought back.

Limited Liability Company: LLCs are created with an operating agreement that should outline the steps that will be taken in case a member dies. Depending on the agreement, the LLC will sometimes vote to bring in a new member, or state law will decide on what happens. Many states decide to simply distribute the assets and dissolve the LLC if this is the case.

Family-owned businesses are affected the most upon the death of an owner. Without business succession planning, your death can lead to unnecessary struggle and animosity.

Regardless of your business structure, it is important to sit down with an experienced business succession or estate planning attorney to discuss your business, liabilities, goals, tax issues and vision for your business. Our business succession attorneys can help owners and shareholders put together a plan that facilitates a smooth transition. Contact us today to schedule a consultation.

 


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