What Is An Estate’s Responsibility For A Decedent’s Business Assets?
A person’s death may not just leave personal assets for their estate to deal with, but also business assets. How the law deals with this latter class of assets depends largely on how the business itself was structured during the deceased owner’s lifetime. In some cases, the personal representative of the probate estate will only have a short amount of time to wind up the business.
How Incorporation, or Lack Thereof, Affects a Probate Estate
Broadly speaking, there are three common types of business entities used by small businesses: corporations, limited liability companies (LLCs), and sole proprietorships. Each involves a slightly different ownership structure and thus deals with the death of an owner in a distinct manner.
In some respects, the corporation is the easiest to administer from a probate perspective. A corporation is owned by one or more shareholders. The corporation itself is a distinct legal person under Florida law, so the death of any shareholder does not affect the continued existence of the corporation itself. Even if the deceased individual was the sole shareholder, their shares in the corporation simply pass under their will, or in the absence of a will under Florida intestacy law.
On the other end of the spectrum you have a sole proprietorship. This refers to an unincorporated business, i.e., one where there is no legal separation between the individual owner and the business. When a sole proprietor dies, their business essentially dies with them. The personal representative then normally has 90 days to wind up the business, which is part of the estate. In some situations, the personal representative may ask the court to continue the business beyond 90 days. Regardless of the timeframe, however, the personal representative is still responsible for managing the end of the business and keeping separate records of its final activities.
In between the sole proprietorship and the corporation is the LLC. Like a corporation, a LLC may have one or more owners, who in this case are referred to as “members” rather than shareholders. In a multi-member LLC there is usually an operating agreement, which serves as a contract between the members. This agreement should specify what to do with the interest of a deceased member. Normally, the deceased member’s estate would not take any direct responsibility for keeping the business going, as that would be left to the surviving members. In the case of a single-member LLC, the death of the sole member usually leads to the estate winding up the business, much the same as with a sole proprietorship.
Speak with a Florida Business Succession Attorney Today
Many small business owners fail to properly plan for what will happen to their business after their death. An experienced St. Petersburg business succession lawyer can sit down and review your options with you. If you need legal advice on this or any other estate planning matter, contact Legacy Protection Lawyers, LLP, today to schedule a consultation.