It’s great to be independent and run your own business, isn’t it? But, what’s going to happen if you were to die unexpectedly?
What happens to your sole proprietor business if you are no longer there to run the business? Are you aware of the financial problems you could be imposing on your family and the financial mess you could end up leaving behind? This means your family.
The sad fact is that far too many of you who operate a sole proprietorship aren’t looking at the big picture.
A sole proprietorship is a unique form of business enterprise. It can consist of a single individual such as a painter or can be a store owner who has a number of employees and anything in between. You might make $5,000 a year or maybe over $500,000 per year.
Why a Sole Proprietor Needs Life Insurance
Life insurance is vital to have if you run your own business as a sole proprietor. If you don’t think so, then I’m going a toss a little bit of reality at you so you can see why life insurance is so vital.
Here’s where you stand.
The Business Costs of Being a Sole Proprietor
Step back and take a clear look at what you’re involved in doing with your sole proprietor business. As a sole proprietor, you may have clients or customers where you have contractual obligations. You may have suppliers that you owe money too or have an existing line of credit. You could have a business owned vehicle, pay rent or a mortgage on a location. Additionally, you could have business credit cards, personal and business loans with bank, and other debts.
And, of course there’s the IRS and everyone’s favorite – Taxes!
Who’s going to cover all these business expenses and debts if were to suddenly die? The answer is quite simple – your estate! And who’s going to be responsible for your estate? It will be those who survive you!
And, these are just the some of the expenses you could be running up as a sole proprietor.
Here’s the other side of the coin.
Business Income of a Sole Proprietor
You can be either a partial financial contributor or you may be the sole bread winner of your family. If you die unexpectedly, where is your family going to find that replacement income if you’re gone and you didn’t have any life insurance?
What Happens to a Sole Proprietor Business When They Die?
Now, what happens to a sole proprietor business when the owner dies? Well, here’s what happens;
- The creditors will be the first to appear to demand payment of all existing and outstanding loans
- Clients will be pressing for their contractual obligations or seeking compensation
- Even if there is a transfer of ownership to a family relation, the new owner will have to pay the transition costs
- The business must still be dissolved
- Federal and state taxes are still owed and must be paid
- Employee wages must be paid along with any obligatory payments such as Workers compensation, Social Security etc.
Then, there is still the lost income that has to be replaced so the family can pay the bills and survive financially. They also have to pay for the burial and funeral expenses, and all your own personal debts have to be paid. This financial mess will be your legacy..(continued on page 2)