PathAfter FAQ
Business Owner Death and Complex Estates
Focused answers for people handling the first days, paperwork, and follow-up steps after a death in California.
Start checklistWeek 2–4 administration and California-specific questions
What happens to a sole proprietorship when the owner dies?It effectively ends. Business assets and liabilities become part of the personal estate. Ongoing contracts should be notified immediately. Clients and vendors need to be informed. Business bank accounts freeze at death — the executor will need letters testamentary to manage them.What happens to an LLC when a member dies?Depends on the operating agreement. Most California LLCs require the surviving members to follow the agreement's buyout, succession, or dissolution provisions. If the deceased was the sole member, the LLC is managed by the personal representative until wound down or transferred. Check…What happens to a partnership when a partner dies?Check the partnership agreement — it should address this directly. Without an agreement, California law may dissolve the partnership at death. Surviving partners may have the right to buy out the deceased's interest. Business clients and counterparties need to be notified of…What happens to a corporation when a shareholder dies?Corporate shares are estate assets. They pass through probate or trust to heirs. The corporation itself continues to operate. The executor manages the shares, including voting rights, until they are transferred. Check the shareholder agreement — it may have right of first…What do I do about business contracts after a death?Review each contract for assignment clauses, change of control provisions, or personal guarantee provisions. Some contracts terminate on the death of a key individual. Others continue with the estate. Notifying counterparties promptly is better than letting contracts lapse unaddressed.What about business employees after the owner dies?They are still entitled to be paid for work performed. The estate is responsible for payroll obligations. If the business is closing, employees must be given proper notice under California and federal WARN Act rules for larger employers. Consult an employment attorney…What if the business has significant debt?Business creditors may file claims against the estate. If the deceased personally guaranteed business loans, those guarantees become estate obligations. A business attorney and a probate attorney both need to be involved. Do not make distributions to heirs before business obligations are…What if the business has ongoing government contracts?Federal and state government contracts often have specific novation or termination provisions triggered by a change in ownership or key personnel death. Notify the contracting agency immediately. Failure to notify can result in contract termination and penalties.What if I want to keep the business running?The executor or trustee has authority to continue operating a business while the estate is settled. The goal is typically to preserve the business's value. If you want to buy the business from the estate, you will need an independent valuation and…What is a key person insurance policy?Life insurance taken out by a business on a key employee or owner, payable to the business. If the deceased had such a policy, the business receives the benefit — not the family. The proceeds can help stabilize the business during transition…