Do Business Ownership Interests Go Through Probate When A Business Owner Dies?
Some people love their jobs so much that they never want to retire, and some achieve that goal, continuing to work until they die. Certain professions attract this attitude more than others; no one dreams of being an octogenarian in a cubicle farm. Business owners are among those who aspire to draw their last breath in the workplace, but this does not mean that they do not have any plans for what will happen to the business once its original owner is gone. Every business owner makes this decision before the business even begins to operate. In some cases, the law determines what happens to the business or its assets when the owner dies, but in other cases, the business owners themselves decide. In either case, this makes your job easier as the personal representative of an entrepreneur’s estate, even if the entrepreneur did not write a will. Probate is a major undertaking, though, and you always have the right to hire a Tampa probate attorney.
Will Your Heirs Inherit a Company, or Just Its Assets and Debts?
When you applied for an employer identification number (EIN) for your business, you were probably thinking more about reducing your tax burden and less about what would happen to the business after you were gone. If it was a sole proprietorship, a one-person operation with no employees except the decedent, then it simply ceases to exist when the original owner dies. All the sole proprietorship’s assets and debts become part of the estate, and the probate court treats them just like any other assets and debts. If the business was an S corporation, it passes to the estate intact, and when the estate settles, one or more beneficiaries inherit it.
Businesses Owned Jointly by Multiple Parties
It is more complex to establish a business that has more than one founding member; business structures such as limited liability companies (LLCs), partnerships, limited partnerships, and limited liability partnerships must file documents with the state outlining how the business will handle matters such as dissolution of the business or disputes among members. These documents, which are called operating agreements for LLCs and partnership agreements for the various types of partnerships, also include provisions about what happens to the ownership interests of a partner or LLC member when he or she dies. It could mean that the ownership interest must go through probate, but more likely, the ownership interest can pass to the successor partner or member without probate. If you are a partial owner of a business partnership or LLC, your will should contain provisions consistent with your company’s partnership agreement or LLC operating agreement.
Contact David Toback With Questions About Probate of the Estate of an Entrepreneur
A Central Florida probate lawyer can help you if you are the personal representative of the estate of someone who owned a business solely or with one or more partners. Contact David Toback in Tampa, Florida to set up a consultation.