Can I pass down my sole proprietorship?
The information in this article applies specifically to sole proprietorship. For details on private company, please refer to our related article.
Unlike sole proprietorship which ceases to exist once the owner dies, a company is a separate legal entity from its shareholders and directors. It continues to exist even when the owner's passing and has perpetual succession until it is wound up or struck off.
What happens to my sole proprietorship after I die?
A sole proprietorship is owned by only ONE person (the owner) and is not a separate legal entity. It ceases to exist when the owner dies. The business assets/liabilities will fall into the owner's estate upon death and can be distributed by the owner's Will. Accordingly, if the business has creditor(s), the creditor(s) can claim from the deceased owner's estate.
Can I list down my sole proprietorship as an asset in my Will?
You should not list your sole proprietorship as an asset by itself since it ceases to exist when you die. Instead, you can list down the various business assets in the Will and allocate those business assets accordingly (as they are directly owned or treated as belonging to the owner directly).
For example, if you own a van under the sole proprietorship, you can list it down as if it belongs directly to you.
How do I pass down my sole proprietorship for my loved ones to continue running it?
Unlike a company (e.g. private company limited by shares), you cannot pass down the business as it will no longer exist when you die. While technically this means that you cannot “pass down” the business, practically it possible to give all its assets (which would now fall into your estate) to a specific beneficiary who can then register another business (can be a different type). However, do note that assets directly distributed to a beneficiary through a Will are considered his/hers which generally will be up to him/her to do what he/she wants with it. Regardless, beneficiaries might still follow the testator's wishes out of goodwill.
Should the beneficiary do intend to run a similar business, you will not be able to dictate how to run the new business (as it does not belong to you). Instead, you can provide guidance on how to do so by putting them in a document, label it clearly, and make reference to the document in your Will. Do keep the document alongside your Will (i.e. keep them at where you safekeep your Will).
In the platform, under Select Clauses >> Other Instructions, key in the following:
To my {Relationship}, {Name}, {Identification Number/details}, who may be interested in having a business similar to {name of your previous business}, you can refer to the document titled “{title of document}”, found together with my Will, for guidance.
If you wish for the business to continue as it is, you should consider converting it to a company business entity (e.g. private company limited by shares).