What Happens to my Business if I Pass Away Without a Will?
Most people do not want to think or even talk about their death, however, the fact is that death is something no one can control or avoid, it may be melancholic to dwell on such a topic but you owe yourself, your family and business partners if any a proper succession plan. Therefore, it is necessary to have a will that clearly states what happens to your business, and estates in general when you pass away. Seek an attorney’s advice on planning because it saves time, money, and heartaches when you are no more. Nevertheless, you may be aware of the importance of living a will but get too reluctant to write one, thus the court is left to decide how to distribute your shares and wealth.
What Happens if you Pass away Without a Will for Different Business Structures
Sole Proprietorship
A sole proprietorship is a business structure where the entire entity is owned by one person.it happens to be one of the easiest and cheapest business to start up. When a sole proprietor dies, the business will terminates as well if there is no will left to hand over the business to the next of kin. This is because the business is tied entirely to the owner (a single owner). The assets are liquidated to settle any pending business debt and the rest distributed according to the states probate laws. Because if there is no will, no more income is drawn from the business, furthermore, in cases where business debts are substantial, there may be very little or nothing left to distribute to the next of kin. Writing a will ensures the continuation of a business and its progress because proper planning ensures the business is left in the safe hands of beneficiaries.
Limited Liability Companies
Limited Liability Companies are run under a set of operating agreements or a constitution, therefore, there is a specific way to handle the business in case one of the owners, or owner dies. During such unfortunate situations, a new member may be appointed through voting to take over if the operating agreement/constitution allows. However, if the deceased did not leave a will and the operating agreement is silent, his/her shares are passed to the spouse or children if any. Additionally, the state decides on the way forward in case there is no legal next of kin. Without a will, you cannot transfer your share of LLC’s profits, losses, and distributions to your preferred successor (if the operating agreement allows).
Partnerships
Professionals recommended having a written and signed partnership agreement that clearly states what happens to shares and the entire business in case a partner dies. When there are no such agreements or you die without leaving a will, the intestacy law takes effect, where all your shares of the business assets are given to close family, that is spouse or children. Your family will be given a year to clear inheritance tax obligations. They may opt to sell your shares even though they are not obliged to sell it to your partner. This may bring about serious disagreements between your family and partner hence affecting the entire business. Without a will, the business is doomed and will automatically dissolve if you die and there is no probate in place to help sort out business debts.
Corporations
Corporations have several directors and owners (shareholders), the best part is that these businesses usually survive when an owner passes away. If you die without leaving a will, and you happen to be the sole shareholder, your estate becomes the new owner of the business until its closure and stocks are distributed according to guidelines given by intestacy laws. Because you left no will, there will be a delay on all these succession processes. The court will have to assign an executor who will determine beneficiaries to your shares.
Who Inherits my Business if there is no Will, According to Intestacy Laws
Married or Civil Partners
Married or civil partners can inherit under rules of intestacy only if they are legally married or in partnership at the time of death. Divorcees and partners who are not in a civil partnership cannot inherit a business according to the rules of intestacy.
Jointly Owned Property
If partners jointly owned the business, the surviving partner inherits the other’s shares, especially if it was a family business owned by couples.
Children
Children of an intestate person will inherit their parent’s business if there is no surviving married or civil partner. The inheritance also depends on whether the business is worth a certain amount of money.
Summary
It is very crucial to write a will despite how large or small your assets or property are, it also does not matter whether you are married or single and with kids or not. A will allows you to designate your business and shares according to how you deem best. You can appoint beneficiaries and make wishes on what you want to happen to your business among other things. Moreover, keep in mind that the absence of a will is likely to deter your business from growing and succeeding as you would have desired. In short, the absence of a will may bring about a devastating outcome after your demise. Finally, you may want to write a will but have no idea where to start, you may have lost a loved one and they left the business and you still wonder how to go about the legal matters, worry not, contact one of our estate planning lawyers at The Mattar Firm for all inquiries and first class assistance and services.