What Happens To The Decedent’s Business Interests During Probate?
You might have heard the estate planning maxim that the law categorizes all assets that are not real estate or accounts full of money as personal property, meaning that the probate court does not see any difference between the socks in the decedent’s sock drawer, on the one hand, and valuable paintings, on the other. Business interests are a different category, entirely. Fortunately, operating a business is such that the decedent must make decisions in his or her lifetime that determine how the probate court should deal with the decedent’s business ownership interests. If the business legally existed, it is not possible for the defendant not to have registered it as one or another business entity type. As a personal representative of a recently deceased business owner’s estate, you must only follow the laws related to what happens to businesses of that particular entity type after the business owner’s death. An Orlando probate lawyer can help you successfully settle the estate of a business owner.
Choosing a Business Entity Type Is an Act of Estate Planning
The form for applying for an employer identification number (EIN) is only one page long, but it requires the applicant to check a box indicating the business entity type, also known as a business structure. The implications of your choice of business structure are many, however. The entity type you choose not only affects how you pay taxes, which documents you must file before your business can begin to operate, and how to dissolve the company or force out one of the partners, but it also determines what happens to each business owner’s ownership interests when that owner dies.
If the business was a sole proprietorship, it simply ceases to exist when the owner dies. Any assets the owner acquired and debts the owner incurred in relation to the business will become part of the estate. Depending on whether the business owner wrote a will, the probate court will distribute the assets according to the will or according to the laws of intestate succession. If the business was an S corporation, it continues to exist after the owner dies, and it becomes part of the estate, to be inherited according to the decedent’s will or according to intestate succession, depending on the circumstances.
A limited liability corporation (LLC) must have an operating agreement, and the various types of partnerships, including limited partnerships and limited liability partnerships require partnership agreements. These documents contain instructions about what happens to the ownership interests of a partial owner after he or she dies. The personal representative of the estate must only follow the instructions in the operating agreement or partnership agreement.
Contact Gierach and Gierach About Settling the Estate of a Business Owner
A probate lawyer can help you fulfill your responsibilities as the personal representative of the estate of a recently deceased person, including distributing the decedent’s business interests. Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.