Sole Proprietorship

• With a sole proprietorship, personal assets and business assets are not separate. If the owner is not adequately insured, court judgements against the business can take away personal property such as a house and personal savings. Insurance can't protect sole proprietors against some liability or creditor claims. For this reason, many business owners operate as limited-liability companies (LLCs) or corporations.
  
  

Estate

• To continue a business after the death of the sole proprietor, the owner must name an executor in the will authorized to run the business during estate administration. The executor duty's may include selling the business to a new owner, or changing the form of the business to an LLC or corporation. Otherwise, the business must be liquidated. However, if there is no family or beneficiary interest in continuing the business, the sole proprietorship form of ownership is the easiest to liquidate. If the owner also solely owned the property on which the business was located, that is part of the personal estate that can be left to heirs.
  
  

Assets

• The executor of the estate of the sole proprietor must obtain a new Employer Identification Number (EIN) from the Internal Revenue Service if the business continues after the owner's death. Assets of the sole proprietorship become part of the estate, such as any other solely-titled property owned by the decedent, including real estate, motor vehicles, bank and brokerage accounts, cash, mutual funds, art, jewelry, antiques and other items of value.
  
  

Considerations

• While most people can benefit from sound estate planning, this is especially true of sole proprietors. While the sole proprietorship may be the most convenient form of business ownership, it has many disadvantages. Anyone hoping to pass a business on to an heir or beneficiary should consult an attorney and an accountant and consider changing the structure of the business. This is especially true if family members depend on the business for support.