What Happens to My Business When I Die?

It’s something that every business owner must grapple with at some point.  What happens to my business when I die?  It depends on a lot of factors, but when it comes to solopreneurs there are potentially even greater stakes.  Often your active contribution is what drives the business’s value.  Without you then you are at risk of losing a legacy for your loved ones and your customers.  So, what happens to your business when you die?  Let’s take a look.

Entity Type

Your business entity type determines how your business will live on.  If you are a sole proprietor your business essentially ends at the time you die.  Your heirs may be able to continue on with the systems you have in place, but don’t have any sellable business entity.  If you have a registered entity you have more options.  A corporation lives on without you and your estate plan dictates the successor owner.  Likewise, an LLC can continue on if the operating agreement spells out provisions for the event of your death.  Either way, there is potential for continuation of the business or sale with these entities.

Life Insurance

This is a very common way to capture the monetary value of your life and your hard work.  Term life is relatively inexpensive, but won’t pay out if you outlive the term.  Whole life will always pay out, but it can be very cost-inefficient.  Furthermore, life insurance does not necessarily protect your business value.  It can be purchased by anyone and is not contingent on the value of your solopreneur business.  There are better options if you want to specifically protect your business value as a continuing operation.

Identify a Successor

You can protect your business value by identifying a successor.  This is often a child, or even a different, younger family member.  You could also seek out someone to mentor and eventually hand over the business for them to run.  Preparing your successor ahead of time is crucial for success.  If too much of your knowledge has not been passed on while you are alive then your business runs the risk of ceasing upon your passing.  Your systems and relationships can live on through the next generation and your successor can continue to build the value that you created.  You provide value to your successor with a thriving business and value to your customers with continuity.


On rare occasions your heirs may not be able to succeed the business, but your heirs could find someone to operate it instead.  They would hire the person to jump in and operate the business as an employee.  There are plenty of pitfalls with this strategy, but it is a decent last-ditch effort.  It’s noteworthy that only certain types of businesses could operate this way, like a financial advice or marketing company.  Something like a real estate agent or copywriter would be much more difficult to accommodate this type of arrangement.

No matter who succeeds your business you should have an updated written description for running your business.  This should include critical systems and contact points for operating the business.  This document should be written so that anyone could pick it up and step into the business with a decent idea of how to operate it.  Of course, they will have to figure out the many nuances as they go, but at least they can keep the income engine running.

Speak with your estate planning attorney and financial planner to decide exactly how to fit this into your plan.  It will serve you, your family, and your customers well.

Sherman Asset Management does not provide legal advice.  The information contained herein is provided for informational purposes only.  Do not rely solely upon this information to make legal decisions.