If your loved one owned a business, you might be wondering what happens to that business after they’ve passed away. That’s where business succession planning comes in.
What is a business succession plan?
In general, a succession plan is a formal document that lays out exactly how the ownership and key leadership of a company should transfer after the current owner steps down, retires, or dies. Some succession plans will simply name successors, new owners who will carry the business forward smoothly as previously planned. Other succession plans may lay out how the business will cease operations and sell or distribute assets.
If your loved one had a succession plan, business legal structure, or left detailed instructions in their will on how to act for their business, you may be able to work with their attorney to help with the transition. If there isn’t a plan in place, assets of ownership are distributed depending on state laws.
It’s helpful to know, if your loved one’s business was a:
- Limited liability corporation (LLC). They’re required to have an operating agreement, which specifies what happens in the event of death.1
- Sole proprietorship. The business is considered part of the estate, and the executor is typically responsible for dissolving the business.2
Consider consulting with a business attorney to better understand your options.