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Sole proprietors and transferring a family business

On Behalf of | Mar 21, 2018 | Blog

As a sole proprietor, you likely spent a good deal of time, energy and effort to build and grow your business. Perhaps you are nearing the time other people retire, so it is natural to think about long-term plans for your business. Or maybe you are younger and heard about someone who got seriously hurt or killed in a car accident. What would happen to your business if you were involved in a similar accident?

One key thing to understand is that you at least need a will. This is because sole proprietors’ business assets are treated the same as if they were personal assets. Die without a will, and your business could end up with someone you would rather not have it.

Are you married?

Texas is a community property state, meaning that even if you opened the business yourself, run it without your spouse and keep business accounts separate from any accounts your spouse has access to, your spouse could still claim a stake in the business if you died first. The degree of ownership depends in part on whether you opened the business before or after marriage. The money and assets you acquired before marriage would be entirely yours. Also be aware that avoiding marriage to sidestep this issue could backfire because Texas recognizes common-law marriage.

Is anyone interested in continuing the business?

Another useful thing to do is gauge the level of interest your family members, friends or freelancers working with the business might have in taking over. If the interest seems to be minimal, you may want to consider selling the business at some point.

Do you have debts?

If you have debts, even if they are personal debts, your business could be at risk when you die. In other words, your estate might have to sell some business assets or the business itself to satisfy these debts. A lawyer can help you sort through the many implications that come with estate planning and being a sole proprietor.

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