Are Businesses Subject to Probate?

If a sole company owner passes away, what happens to their business? Deciding how to continue the operations with the same quality and distributing the decedent’s title and assets may require probate. You can learn how the process works to prepare for the future or navigate a transitional period.

What Are Probate Assets?

There are many things you can acquire throughout your life. These possessions are known as assets and include physical, financial or digital property you own.

When someone passes away, the possessions they have sole ownership of are transferred to others in a process called probate. Any belongings that go through these steps are referred to as probate assets.

A trusted person handles the inventory of the probate assets, paying any debt owed and distributing the property according to the last will and testament.

If there isn’t a will, the local laws will determine who the representative will be and how the decedent’s belongings will be distributed.

Assets Subject to Probate

Many kinds of assets are subject to probate, including:

• Personal property: Some common examples include jewelry, clothing, furniture, electronics, appliances, family heirlooms and collectors’ items such as coins, stamps or art.
• Individually owned assets: These possessions encompass titled assets like your car, house, bank or brokerage accounts, investment accounts, portfolios and businesses.
• Tenancy in common property: A tenancy in common property refers to a specific percentage of an asset that someone owns, like land or real estate property, bank or brokerage accounts and investment portfolios.
• Assets naming a deceased beneficiary: Any assets designated to a deceased beneficiary must go through the probate process to determine the new ownership and distribution.

Are Businesses Subject to Probate?

Company assets must be distributed when a sole owner passes away. The business assets in probate may include capital, building, equipment, supplies and other belongings.

A sole proprietor can take a few steps to avoid having their business-related assets go through probate. For example, careful planning to create a business succession plan can designate whether family members or someone else should receive the assets.

The succession plan can determine how the business should operate after the owner passes away. The plan can also provide customized instructions, like if the sole-business owner wants the beneficiaries to sell the equipment or property and cease the operations instead.