Business Debts

If the deceased was self-employed (ie, owned a sole proprietorship), the estate may have to settle some business debts. Under this business structure, where the self-employed worker and the business are considered one and the same, liability is unlimited, meaning the individual's personal assets can be seized by creditors.

As such, although the death of the owner ends the sole proprietorship, the estate must list any outstanding business debt as a Liability in the Inventory and settle them with creditors as part of the estate settlement process.

When listing the debt in the Inventory, include the amount, a description of the debt, the business name, and the business or tax ID number.

If the debt is secured (eg, a bank has a right on an asset of the deceased), select this option to link the debt to the asset charged with the security. The asset must already be included in the Assets section of the Inventory.

Note that businesses formed as Partnerships are normally ended by the death of a partner, and the estate is entitled to the deceased's net interest. However, some partnership agreements may provide for the continuation of the business even after the death of a partner; the executor should review the partnership agreement and determine if any steps need to be taken to protect the deceased's interest, and potentially to also ensure the day-to-day operations of business are being handled.