Continuity refers to something occurring in an uninterrupted state or on a steady and ongoing basis. In part III of our 3-part series, we will discuss how to close a small business when an owner passes away. Yes, continuity planning includes deciding when and how to shut down.
How does a business wrap up operations when an owner passes away?
- It must be decided if the business can and will continue to operate. If the business will continue, the deceased owner’s interest must be cleared. That interest must be properly conveyed through some type of legal process: will, trust, operating agreement, buy-sell agreement, etc. Planning in advance for business continuity can allow this transition to happen with little to no disruption to the business.
- If the business will be completely dissolved, a dissolution will be filed with the Secretary of State. A dissolution is an official notice to the public that a business is no longer active. Note: final expenses and taxes must be paid from the business before the remaining proceeds can be distributed to heirs, partners, etc.
- If a business is going to carry on without the deceased owner, the formation filings must be updated with the Secretary of State to show the deceased owner no longer has an interest in the business. It is important to make these filings or changes with the Secretary of State to avoid incurring more dissolution fees over time.
Business owners certainly have plenty on their plates to keep them busy, but that is all the more reason to have a business continuity plan in place. If you have questions about planning for your business to continue without interruption upon your incapacity or death, please contact us.