Can a Sole Proprietorship Be Left to Someone Else After Death?

Term

The term of the sole proprietorship does not last past the life of the original business owner. Since there is no separate business entity, the business dies with the owner. Because of this, you will not be able to pass your specific sole proprietorship on to a family member or friend when you die. If you want to pass your business on to someone else, it makes sense to set up another business entity that has a perpetual term.

While you cannot specifically pass on the business itself, you can pass on its property. The property in the business is owned by the sole proprietor. This means that the property in the business will be passed on in the same way as his personal property. It will be distributed according to the will or trust documents that the sole proprietor created before his death. If no documentation was created, it will be distributed according to the rules of the local probate court.

When you run a sole proprietorship, you can enter into business contracts and take on business debt. In this situation, the business debt will not be separated from your personal debt when you die. It will be handled in the same way as your personal debt. Any assets that you have will be used to pay off the outstanding debts when you die. Once your personal assets are exhausted, the rest of the debt will be forgiven.

With a sole proprietorship, you can pass on physical property and even clients. However, you will not be able to pass on an actual business. If you desire to pass on a business, you should set up a limited liability company or a corporation. This will allow you to will the business to a loved one upon your death.