Question: I run a small business as a sole proprietor. It has four employees and has provided my family with a very comfortable life. I am concerned that, should I pass away, the business may not be able to operate effectively while my estate is being wound up. What should I do?
Answer: It is very important that you create a separate entity for the business. This will enable it to carry on functioning should you not be around.
You should consider setting up a company and running your business from it.
There will be a small initial cost to set it up, as well as some statutory returns that must be done each year.
These are, however, outweighed by enabling the business to continue functioning smoothly in your absence.
Housing the business in a company will also make it a lot easier for you or your heirs to sell the business in years to come.
Most owners of small businesses severely underestimate the value of their businesses. This business has been giving you and your family a very comfortable income for many years, so it has a value.
It would be a tragedy if this income-generating machine disappears when you are no longer around. I would strongly recommend that you have your business valued. This will enable you to put structures in place to retain the value of the business.
You would own all the shares in the company you set up, so there would be no real change in the ownership of the business.
You can now, however, consider doing the following:
You need to give some thought to who would run the business should you not be around. This could be your spouse, one of your existing employees or someone else.
It is important that you think this through now and start setting up structures to transfer your knowledge and expertise so that the business can carry on without you.