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Home > Blog > Estate Planning (Wills, Trusts, Deeds, Business Succession) > Problems Can Happen When Your Business Goes Through Probate

Problems Can Happen When Your Business Goes Through Probate


When planning an estate, we often give a lot of thought to our personal property, or our real property. Many of us however, fail to give thought to our business. We see our business as a separate entity, insulated from our personal passing, and just envision the business carrying on as usual after you as the owner passes away.

But that isn’t always the case, and the failure to do estate planning for a business can lead to a business being devastated after going through the probate process.

What Type of Business Entity?

What happens to a business in probate, often depends on what kind of business it is.

  • A sole proprietorship will die when you do; unless the heir(s) by will or intestacy wish to take on the business; the assets will be sold and liquidated and the remaining profits, if any, left to whomever you dictate in your will, or to whomever the state says gets those assets, should you die without any estate documents (intestate).
  • A partnership will depend on whether there is a written partnership agreement. If there is an agreement that says how the partnership continues on the death of a partner, the business will continue in that way. But if there is no written agreement, the partnership is just like a sole proprietorship—it will be liquidated and the proceeds passed on to your beneficiaries.
  • Most LLCs have operating agreements that will say what happens when a managing member or owner passes away. If your operating agreement does not, the LLC can still go on doing business, the membership interests will have to go through probate and vest in the beneficiaries who usually pass the day-to-day operations on to new management, as dictated by Florida’s limited liability law.
  • Corporations don’t die and don’t get liquidated if an owner passes away. Rather, the owner’s interest in the business passes to that owner’s beneficiaries the business lives, and the deceased owner has the beneficiaries “subbed in.” This of course may not be good for the business, and may cause conflict, but legally, the business still exists.

Valuating the Business

On the death of the owner, in probate, the business will have to be valuated so that it can be liquidated, if liquidation is necessary. The value of the business can increase the overall value of the estate, which may lead to paying more estate taxes if the then existing asset threshold is exceeded.

Valuations are not cheap—in a large business, a valuation may cost $10,000, money that is coming out of your estate.

Conflicts With New Management

If your business shares pass to your beneficiaries (such as your relatives), you could find that there is conflict between your beneficiaries as the new owners, and the current shareholders. This conflict could end up destroying a business.

In the meantime, with a business going through probate almost nothing can be done to the business without probate court approval. That means that your business operations are mired in court, and slowed down by the probate court.

The best route? Don’t let a business go through probate—estate and business planning can avoid the probate process. Call the West Palm Beach estate planning lawyers at The Law Offices of Larry E. Bray today for help with your estate planning and probate court needs.



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