Sole Proprietorship - Death of Proprietor

The Problems

1.  You are the business - your death may terminate the business.

2.  In the event of death, the heirs must either:

LIQUIDATE (Forced Sale)	OR	REORGANIZE
(1)  Substantial loss usually		(1) Heirs take over:
results.		a) Usually inexperienced.
		b) At best taking over a business
		in which the key man has been
		eliminated.
		c) Often operates with reluctant
		employees and creditors.
		d) Overwhelming percentage do not succeed.
		(2) Sell to new owner (employee):
		a) Often the best thing to do but
		there would have to be an agreement in
		existence.
		b) Is there a qualified employee?
		c) Where does the employee get cash?

THE SOLUTION If liquidation is the alternative   If reorganization is the alternative                        THEN                        THEN       A liquidation buffer fund may be   A buffer fund to cushion the shock or a the solution.   funded employee buy-out agreement.

The information contained in this article is intended to provide general guidelines only. The application and impact of the law can vary widely from case to case based on the specific or unique facts involved. Accordingly, the information in this article is not intended to serve as legal, accounting or tax advice. Users are encouraged to consult with their professional advisers for advice concerning specific matters before making a decision.