What happens when a business owner dies?
When a business owner dies, a significant issue is deciding who will be named the next owner. And this situation can get very complicated, especially if there has been no written agreement or stipulation that decides on the matter.
Suppose the business is one with multiple owners. In that case, whether it’s a partnership, corporation, LLC, etc., it is common practice for them to form some sort of shareholders’ agreement that stipulates that the corporation’s succession plan should one of the owners die.
Some corporations even go as far as to have a detailed agreement if the will’s provisions are not in the company’s best interest. For example, if the business owner who has passed away left a will saying that his kids would take over the company, but at the time he passes, the kids are minors who cannot yet take on the responsibility of running the business, they can agree on an arrangement that would be in the company’s best interest.
But absent an agreement written by the co-owners or shareholders, it can come down to a probate court.
What happens in a Probate Court?
Should there be no agreement stipulating the course of action to take in case of a business owner’s death, the matter will be decided by a probate court.
Usually, if there is a will or trust, the probate would decide that ownership will be given according to the terms of the will or trust. So depending on what the document states, the ownership percentage and rights can go to the spouse, kids, etc.
So what should co-owners do?
Business owners and shareholders must plan ahead and stipulate on these things ahead of time. If something happens to one of the business owners, they can make the changes in ownership seamlessly and without conflict.