Written by Jonathan Breeden
If your grandparent, parent, spouse, or sibling owned a business when they passed away and they did not have a will in place, you are likely wondering who inherits it. The answer depends on many factors, including the type of legal entity, whether a contract regarding ownership upon death is in place, and North Carolina’s intestate succession laws.
You should talk with an experienced wills and power of attorney lawyer in North Carolina about inheriting a business in NC. You can reach Breeden Law Office by calling (919) 661-4970, or by submitting your information through the online form.
Whether the business passes on to a family member depends on the type of legal entity. In general, any ownership in a business passes to the decedent’s estate. The ownership would then pass on to an heir based on North Carolina law, if there is no will.
Did your loved one incorporate the business and remain the only shareholder? Since your relative was the sole owner of shares in the company, those shares would pass on as part of their estate.
If your loved one was not the only shareholder in a corporation, then whoever inherits their shares becomes part owner with one or several others. However, if it is a small business, your relative and their co-owners may have had an agreement regarding how ownership could pass upon someone’s passing.
If your loved one had a sole proprietorship and had not formed a separate legal entity, then no one may inherit the business. There is no legal entity to own. Your loved one may have had inventory, equipment, or intellectual property rights, and these would pass on as if they were personal property.
If your loved one was part of a partnership, then the business may terminate upon your loved one’s death or pass to the surviving partner – it depends on the partnership agreement and whether the partners had formed a separate legal entity.
If your loved one was not the sole owner of the business, then you need to determine whether there was a partnership, shareholder, or other legal agreement in place that dictates what happens when an owner passes away.
An agreement may call for the business to buy out the owner’s shares from the estate. Some businesses go so far as to purchase a type of life insurance that ensures the business has the funds necessary to purchase the deceased individual’s shares.
There may be a buy/sell agreement that gives the remaining owners the option to purchase the deceased individual’s shares from the estate within a certain period of time. This way co-owners have the right to buy those shares, or they can let them be inherited through North Carolina law.
A business agreement also can dictate that any shares that pass on to a deceased owner’s estate or family member become non-voting ownership. A relative may inherit the shares, but not the right to participate in the business.
If there are shares of a business that will pass to your loved one’s estate, but there is no relevant business contract in place and no will controlling who receives those shares, then North Carolina’s intestate succession laws determine the heir(s).
A summary of some of North Carolina’s intestate succession laws include:
North Carolina’s intestate succession laws are complicated. If you believe you or other relatives may be inheriting a business in NC, contact Breeden Law Office right away.
If you become the sole heir of a business, you need to decide what to do next. What are your current legal and financial responsibilities regarding the business? Are there creditors and debtors? It is important to talk with other owners or employees of the business and any other professional who worked with your relative, including an attorney, financial advisor, or accountant, before you decide what to do.
If, given the intestate succession laws, the shares are divided among more than one person, you will have to work closely with your relatives to determine what to do with the business. You should discuss whether any of you wish to step up and run the business, or whether one or more of you wish to sell your shares or dissolve the business entirely.