What Happens to a Franchise When the Owner Dies? Business Succession Planning

Franchise Assignment and Sale

If an owner dies, some franchisors allow assignment to a spouse or heirs without approval. More often, approval is required within 6-12 months. Every agreement controls how and if a franchisee can sell. The reasons for this control are key for franchisors and franchisees.

When a franchisee dies, the franchise fate depends on state law. Some states give a spouse, heirs, and estate a chance to participate for a reasonable time after death.

If fulfilled with the franchisor, you can sell on the market. Sites like BizBuySell.com expose offers to potential buyers. You can add a referral bonus or host events to find a buyer. Often the plan is for loved ones to benefit. It’s common for the recipient to have worked there, which makes transition smooth.

Franchisors failing the agreement or Code risk franchisees leaving. Franchisors can’t engage in misleading conduct. Franchises are sold as "owning your own business." But selling or passing down is limited by the franchisor.

Business Structure and Ownership Continuity

If a business is a sole proprietorship, it stops on the owner’s death. Assets and debts become personal holdings. If it’s a corporation or S corporation, the estate is the new owner. An LLC must have an operating agreement saying what happens when someone dies. If it’s a partnership, what happens depends on the partnership agreement.

All businesses have someone in charge, often a loved one for family businesses. NFL teams must have a succession plan. NBA assumes billionaires have one. Estates can cover team costs short-term, but decisions fall to heirs.

Unlike sole proprietorships, corporations don’t automatically cease when an owner dies. Instead, their estate becomes the owner.

Legality and Sale Options

Ensure financials are current to maximize return when selling. Disputes may be solved by discussion, or with legal advice where no compromise is possible.

It is legal to have a third party operate your business. Research properly with guidance on techniques to find hidden franchise information.

What happens to a business if an owner dies? In most cases without a will, the remaining assets are distributed according to state law.

If a married person who held stocks jointly with a spouse dies, then the surviving spouse typically becomes the sole owner.

The deceased owner’s stock or other ownership interests will transfer in accordance with his or her will or, if there is no Will, the intestacy statutes.

Family businesses are often passed down through generations with the help of succession planning.

If Sue and Ted were general partners but did not have a formal partnership agreement, Sue’s death dissolves the partnership.

Pay off the deceased’s debts, which include the debts of the business to creditors. Distribute the remaining assets to the beneficiaries as outlined in the will.

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