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Charleston Estate Planning & Asset Protection Blog

Sunday, January 27, 2019

How to Wind Down a Business When a Loved One Dies

If your loved one had a business succession plan, the plan should dictate how to transfer ownership of the business or close the business. However, if your family member died without a business succession plan, the business structure will govern how you need to wind down the business. Our South Carolina probate and trust administration lawyers discuss some of the common business structures and what is involved in finalizing a person’s interest in the business when that person dies.

What Happens to a Sole Proprietorship When a Person Dies?

A sole proprietorship ends when the person dies because the person owns all assets of the business. Therefore, the business assets are transferred to the probate estate and either liquidated by the estate or distributed to heirs according to the terms of the person’s will. In many cases, the business assets are liquidated, business debts are paid, and any remaining proceeds from the business are distributed to the person’s heirs.
What Happens to Corporate Stock After a Death?

If your family member incorporated his or her business, the estate owns the shares of the company upon death. Depending on whether your family member owned all the shares, most of the shares, or some of the shares determine how the interest is handled. The estate, as a sole shareholder, can elect to sell the business or close the business. If your family member owned some of the shares of the business, those shares could be sold, and the proceeds distributed to heirs according to the will. On the other hand, the corporate shares could also be transferred to the heirs, and the heirs could decide how to proceed after the estate is closed.

Closing a Limited Liability Company After a Member Dies?

A Limited Liability Company (LLC) may be a single-member LLC or a multi-member LLC. In either case, the LLC’s operating agreement should dictate what happens to the LLC upon a member’s death. The operating agreement may allow for the liquidation of the member’s shares and the addition of a new member to the LLC. If your family member was the sole shareholder of the LLC, the estate becomes the owner of the business and can dissolve the business or sell the business for the benefit of the heirs if the operating agreement does not provide for an exit plan when a member dies.
What Happens to a Partner’s Interest in a Company?

When a partner dies, the partnership terminates unless the partners had a partnership agreement that provides for the death of a partner. A partnership agreement can provide for the sale or purchase of a deceased’s partner’s interest in the business so that the business can continue after the death of a partner.  The estate would receive the proceeds from the sale of the partnership interest and distribute those proceeds to the heirs.

South Carolina Estate Planning Attorneys for Business Owners

Business owners can make it easier for their families by creating an estate plan that includes a business succession plan. Schedule a consult with one of our South Carolina probate and trust administration lawyers today. With a business succession plan, the family members can easily wind down the business or transfer the business through the estate. A plan can also take care of many of the liability and tax issues that some families face when a business owner dies.

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Wiles Law Firm, LLC helps clients with their estate planning needs in Charleston, South Carolina and the surrounding areas such as West Ashley, Summerville, North Charleston, Mount Pleasant, and John's Island.

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