Estate Planning Means Business PlanningDec 13, 2022 03:51PM ● By Debora Faulkner
All businesses are different, yet all businesses are the same.
Bills need to be paid. Taxes filed. Contracts honored. Projects completed. People hired. People fired. Accounting to be done. Payroll to be made. It’s all part of the business.
What happens if the person who makes all of those decisions – aka the business owner – dies? Then, who makes those decisions? Their spouse? A second in command? A board director? No one?
Sadly, in South Carolina, the answer is, too often, I don’t know. Small businesses make up the bulk of our state’s economy. Without a business succession plan (who takes over in the event of the owner’s demise or disability) or an estate plan, be prepared for the prospect of unnecessary delays, confusion, and unanticipated expenses. During my more than 20 years as Probate Judge in Greenville County, I have seen successful small businesses left in limbo because the deceased owner failed to plan ahead.
Approximately 40,000 estates are filed in the Probate Courts of South Carolina each year. An average of 3,500 estates are filed in Greenville County annually, with 4,206 filed in 2021, a record high. So what do you need to know if you have a small business?
Business Planning: When you decide to start your business or soon thereafter, consult with a qualified attorney to select the best type of ownership structure for the business. For single owners, you may choose a sole proprietorship, a single member LLC, or you may choose to incorporate your business with shareholders. Your attorney will advise you on the advantages and disadvantages of each type of legal entity. With your attorney’s guidance, you can determine the type that best serves and protects your business, including the continuity of your business at your death. Later, as your business grows or your relationships with your beneficiaries change, see your attorney again to make sure the existing business structure is still the best choice for you.
Probate and Proprietorships: Probate law directs the transfer of the assets of a deceased person to his or her beneficiaries named in a valid will. Or, if no will, to relatives or “next of kin” determined by state law who are alive upon the owner’s date of death. The appointment of a personal representative is required to manage the sole proprietor’s estate. The personal representative must always adhere to state law, court’s directives, and make decisions that protect the interests of the beneficiaries and creditors. One of the first duties of the personal representative is to identify and value the business and non-business property, including accounting for any income the business generates. Another duty of the personal representative is to maximize the value of the estate. This means collecting all outstanding accounts receivable. Creditors may file claims against the estate for the owner’s failure to pay debts. Taxes will become due, insurance, employee pay, etc. A personal representatives may have to sell estate assets to generate cash. There are many aspects to the work of the personal representative too numerous to discuss here. Under these complicated circumstances, a personal representative should proceed only with the advice of an attorney, and, perhaps a CPA, an appraiser, a real estate agent, and a therapist for the stress. Once the claims are paid and final estate expenses are paid, the personal representative distributes the remaining estate property to the beneficiaries, and the matter is closed.
Probate and Business Continuity: The will may provide authority to the personal representative to liquidate, sell, or otherwise manage the business. Without a will, our South Carolina law provides for the continuation of an unincorporated business for four months if continuation can preserve the value of the business. Time in excess of four months is only allowed with court approval. Court approval may give additional months. Or, approval may allow the business to continue during the entire estate administration if the personal representative chooses to incorporate the business and no one objects. Court approvals require court filings and hearings to allow beneficiaries and/or creditors to have their say. Again, legal counsel is essential for the personal representative to navigate these waters
How long before it’s over?: If the estate is opened promptly with no issues, probate administration can be completed in nine or 10 months. (Eight months of the wait time is to satisfy the state law giving creditors 8 months to file claims.) However, in the above scenario, the time for administration will most probably be longer. Imagine having to inventory and value used cars remaining in an owner’s several small car lots, addressing employee issues, unpaid taxes, etc. It could take longer still if beneficiaries and creditors are litigious or if there are tax matters or outstanding judgments against the owner.
How to make this easier: Don’t procrastinate. As stated above, consult with an attorney at the inception of your business or as soon as thereafter as possible to structure your business. Then, with your attorney’s help, design an estate plan that is consistent with your business structure. Planning is essential to minimize business losses, long delays, and unnecessary expenses. Your loved ones will be the ultimate beneficiaries of your legacy of planning. They won’t have to say, “It’s tied up in probate!”
Debora Faulkner has served as the Greenville County Probate Judge since 1999. She is the past president of the South Carolina Association of Probate Judges. Learn more at