Attorney, Business Accounts, Business Registration, Common Estates, Common Executors, Corporation, CPA, decedent, estate, Estate Administration, Estate Plan, Executor, Final Taxes, Schedule C, Small Business, Small Business Owners, Sole Proprietor
While constructing their estate plans, small business owners should advise their executors about changes in their business. Although the executors don’t need to know the day-to-day business operations, small business owners should inform their executors of the following:
- Any sale of the business.
- A change in registration of the business.
- The succession plan for the business, if any.
Consequently, if the small business owners overlook their executors, the executors will experience a chaotic estate administration.
Sharing an Experience Dealing with a Small Business in an Estate
As executor, I had the pleasure of experiencing chaos brought on by a small business. The chaos resulted from a change in registration of the decedent’s business in which I had no knowledge. When forming the business, the decedent initially registered the business as a corporation. So, shortly after the decedent’s death, I began to research how to close a corporation in Massachusetts. The research effort involved contacting state personnel from various departments and was very thorough. At times, even my attorney offered some help. So, my effort of disrupting people to learn how to close a corporation went on for a few months.
As I began to pile up information, tax season approached. So, I put the research aside and concentrated on the decedent’s final taxes. While discussing the final taxes with the CPA, the topic of the business came up. After describing the anguish of dealing with the business, the CPA became puzzled. The CPA, while puzzled, explained the following:
- The decedent changed the registration of the business from a corporation to a sole proprietorship about seven years ago.
- By closing the business accounts as depicted in the article Closing the Decedent’s Business Accounts: An Easy Thanksgiving Task, and removing the inventory, I was already in the process of closing the business.
- The only task remaining was to file the final schedule C for the business as part of the final taxes.
After the discussion with the CPA, a feeling of both relief and embarrassment struck me. Although closing the business was nearly complete, the time wasted in useless research was unacceptable. Additionally, the amount of people inconvenienced for nothing bothered me. Because the decedent forgot to tell me of the registration change, chaos developed in the estate administration.
Small Business Owners and Executors
Basically, this article relates to small business owners that operate as self-employed individuals. As individuals, most small business owners have common estates and typically name common executors to handle their estates. Additionally, since most common executors have little experience in handling a business, the small business owners must provide assistance. Therefore, in addition to keeping their executors informed about the business, small business owners should provide contacts that could help with handling the business, if necessary. By using the information provided, the executors should experience a smooth close or a smooth transfer of the business.
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