As a business owner, you’ve spent years focused on growing your enterprise. Unless you have a specific business structure like an LLC and completed succession planning, consequences of dying can be costly and chaotic for your family.
An experienced attorney with knowledge of Illinois estate planning and probate laws can help describe the fate of a business for which succession planning is unfinished.
Scenarios for Businesses After the Owner’s Death
What happens to your business when you die is determined largely by the proactive steps you take. Business owners who plan carefully and execute all of the necessary steps may help their heirs avoid the time and expense of probate.
Sole Proprietors
An unincorporated sole proprietorship dissolves upon the death of the owner. The business’s cash, inventory, and other assets become part of the owner’s estate along with other personal effects.
If a family member wants to continue the business, the process would be similar to selling to another sole proprietor. Your heir would receive the business assets, but it would be a new business entity.
Partnership or LLC
A partnership agreement dictates what happens to a partnership upon the death of a partner. If the deceased partner had a majority interest, options include dissolving the partnership and distributing the assets to each partner, having living partners buy out the deceased partner’s estate’s interest, or having the living partners continue to run the business.
Single-member LLCs face more complicated issues because the owner is the sole decision maker and no one else is authorized to act. However, unlike sole proprietorships, LLCs can be structured to continue to exist beyond the life of the owner. Without succession planning even a well-structured LLC can face shutdown or liquidation.
The Probate Problem
If a corporation, LLC, or partnership does not specify how the death of an owner or partner is managed, the assets must go through the will, trust, and/or probate court. Probate can be expensive and lengthy. It also opens the risk for third parties to contest a will or estate plan.
If the total value of a deceased person’s estate is less than $150,000 (in 2025) and does not contain real estate, it can avoid probate proceedings. However for most business owners the threshold is easily exceeded without proper advanced planning.
In a closely held corporation, stock remaining solely owned by the deceased alone may be subject to probate and Illinois intestate laws.
What Illinois Intestate Law Means for Your Business
If you die without a will, your assets will go to your closest relatives under state intestate succession laws. Heirs might discover that they are forced to sell individual stocks and membership interests to cover liabilities associated with an owner’s passing. Business assets may be sold to pay estate taxes. Unintended successors are rarely as dedicated to a business’s success as the founder was.
Tools That Can Protect Your Business
Fortunately, Illinois law provides business owners many planning options, such as:
- Wills provide basic asset allocation but they go through probate
- Trusts offer more control and avoid probate
- Buy-sell agreements clarify how business ownership is transferred
- Power of attorney allows a trusted partner to make decisions for you if you are unable to
If you have co-investors or partners, a buy-sell agreement is powerful. This document ensures that you or your loved ones receive the fair market value of your interest in the business if you or your heirs have to sell it.
LLC owners have the option of putting membership interests into a living trust. This vehicle allows the transfer of ownership seamlessly to heirs without going through probate, avoiding delays and fees while protecting privacy.
Take the Next Step in Your Business’s Future
Professional legal guidance on business succession planning is invaluable. Legacy & Life Law attorneys are uniquely qualified to provide that guidance as Illinois estate and tax planning experts. Call for a consultation today.