What happens to a sole proprietorship when the owner dies?
Legally, the business ends with you, because a sole proprietorship was never separate from its owner. Its equipment, accounts, receivables and contracts are part of your personal estate and pass under your will or trust, or under your state’s inheritance rules if you have neither, and whoever inherits them can keep the work going, sell what is left or close it down. A living trust can hold those business assets so your successor can act without waiting for probate.
Decide where your business goes.
- Will packageA last will and testament, prepared online from your answers.from $695
- Trust packageA revocable living trust with a certification of trust and a pour-over will, prepared online from your answers.from $1,495
Starting prices, per person. Couples can set up a joint trust for both of you, or two plans with $100 off the second.
- Free health care directive: Says who decides about your medical care if you cannot, and what you want.
- Free financial power of attorney: Names who can handle your money matters if you are alive but unable to act for yourself.
Boring Insurance Agency is a licensed insurance agency, not a law firm, and does not provide legal advice. No attorney-client relationship is created by using this service. These documents are self-help forms prepared from the information you provide. Laws vary by state, and your circumstances may require changes these forms do not make. We recommend you have an attorney licensed in your state review your documents before you sign them.
Already started? Log in to your plan.
Kevin Kelsey
Founder | Principal Agent
Founder and principal agent of Boring Insurance, CA License #6011822. He put off his own estate plan because he did not want to take the time to find a lawyer, then built the offer so owners can set up a will or living trust online and fund it with life insurance. He is a licensed agent, not an attorney, and these pages are not legal advice.
At a glance
Equipment, vehicles and inventory
- What happens when the owner dies
- Part of your estate. They pass to whoever your will or trust names.
Business bank accounts in your name
- What happens when the owner dies
- Usually frozen until an executor or successor trustee shows authority.
Money customers owe you
- What happens when the owner dies
- An asset of your estate, collected by your executor or trustee.
Licenses and permits in your name
- What happens when the owner dies
- Often personal to you. Check whether yours can transfer at all.
Debts of the business
- What happens when the owner dies
- Your debts, paid from your estate before heirs receive anything.
The detail
The SBA states that "Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities."
U.S. Small Business Administration, "Choose a business structure"
A California will is a devise that may pour into a trust: "A devise ... may be made by a will to the trustee of a trust established or to be established by the testator," if the trust is identified in the will and its terms are written down.
If an estate goes through probate in California, the attorney’s statutory fee is 4% of the first $100,000, 3% of the next $100,000 and 2% of the next $800,000 of the estate accounted for.
California Probate Code section 10810 (statutory attorney compensation in probate)
Generally, life insurance proceeds a beneficiary receives because of the insured person’s death are not included in gross income and do not have to be reported, though interest earned on them is taxable.
What this means for you
- There is no company to inherit, only things. Your heir receives a truck, a client list and a bank balance, not a business with its own existence. Say in your plan who gets them and whether you want the work continued or sold.
- Write down how the business actually runs. Customers, suppliers, passwords and the jobs in progress live in your head. A one-page letter kept with your plan is the cheapest thing on this page.
- Use a trust if speed matters. A will works through probate, which takes time while customers wait. Assets in a living trust can be handled by your successor trustee right away.
- Life insurance buys the time. A death benefit paid to your family or your trust replaces your income and pays the business debts that would otherwise come out of what you leave them.
Go deeper on any of these
Related questions
- Can my spouse keep running my sole proprietorship?
They can run a business with the assets they inherit, but legally it becomes their own sole proprietorship, with their own registrations and, where needed, their own licenses. Plan for the paperwork as well as the work.
- Should I form an LLC instead?
An LLC makes the business a separate thing your heirs can inherit and keeps operating while ownership passes, but it is not required to buy insurance or to plan your estate. Talk to your accountant about the tax side.
- Do I need an LLC to get business insurance?
- Are my business debts passed to my family?
They are paid from your estate first, because a sole proprietor’s business debts are personal debts. Your heirs receive what is left; life insurance paid to a named beneficiary is generally not part of the probate estate.
- How do I know whether I need a will, a trust or an attorney?
Take the Business Owner Plan Check. It asks about ten short questions about the business, your household and what you already have, then says whether most owners in your position set up a will or a living trust, or should see an attorney first, and estimates the life insurance in ranges with the arithmetic shown.
- Take the Plan Check
Set it up, then fund it
We set up wills and revocable living trusts through our online document platform, from $695 for a will and $1,495 for a trust, and we place the life insurance that pays into them. We do not draft operating, partnership or buy-sell agreements, and we do not give legal advice; when your situation needs an attorney, the Plan Check says so.
Boring Insurance Agency is a licensed insurance agency, not a law firm, and does not provide legal advice. No attorney-client relationship is created by using this service. These documents are self-help forms prepared from the information you provide. Laws vary by state, and your circumstances may require changes these forms do not make. We recommend you have an attorney licensed in your state review your documents before you sign them.
Written by Kevin Kelsey, founder and principal agent, CA License #6011822. Last updated 2026-10-05. See all guides.