Estate planning can be complicated for individuals who operate sole proprietorships. In this popular form of small business, the assets of the business and the assets of the individual are one and the same. Someone holding a lien against your business may claim your personal assets. The same goes for any personal debts. When you pass away, this relationship remains.
Because the performance of your business is the result of your decision making and the relationships you have developed, your business is many times worth less when you are not there to run things. This can often be a direct result of your success. Because others have seen how well you have done, you may now have more competitors. Your competition has little reason to purchase your enterprise when they may not be able to hold on to your share of the market by doing so. In the absence of your business, they may see their revenues rise, particularly in the short term.
If a family member is interested and has the skills needed to continue your business, you can plan for them to take over the business. This is often your intention. They may already be working at the business in some capacity and be best equipped to continue the successful operation of your enterprise.
Issues may arise on several fronts. The value of the business may be large enough that tax liabilities to arise. Keep in mind that there is no separation of your personal and business assets with a sole proprietorship. Another problem may come about from other family members who feel that they are in some way shortchanged by this arrangement. You need to speak with your family and then speak with an estate planning attorney to develop the best plan for you.