When someone passes away, their estate often includes familiar assets like homes, vehicles, and bank accounts. But if the decedent was entrepreneurial or invested widely, there may also be business interests that are not immediately obvious. These can include shares in a closely held corporation, membership in an LLC, partnership rights, and informal side ventures. Unlike tangible property, these assets may not show up on a driveway or a bank statement, but they must be uncovered and reported. That responsibility falls on the estate’s executor or administrator who is often a family member or loved one without financial, legal, or corporate expertise. A recent study found that 76% of Americans die intestate (without a will or estate plan). If they also owned a business or business interests, they inevitably leave a hot mess for their estate administrator to untangle.
Legal Duty to Identify All Estate Assets
In Virginia, executors have a clear legal obligation to identify, collect, and preserve all assets of the estate, including business interests. Virginia law requires them to pursue and enforce the decedent’s contractual rights, such as business loans, promissory notes, and unpaid invoices. Executors must also file a complete inventory of the estate with the Commissioner of Accounts within four months of qualification and submit regular accountings. If an executor fails to exercise due care, such as by overlooking valuable stock, a loan repayment, or an active contract, they may be held personally liable for losses to the estate caused by negligence or improper conduct.
Why Some Business Assets Are Hard to Spot
Common business-related assets can be difficult to identify, especially when the decedent kept limited records or handled matters informally. In Virginia, executors may be required to locate items that may not have been fully documented in family records, such as business loans, outstanding promissory notes, unpaid invoices for services rendered, pending contract payments, royalty or licensing rights, and membership or ownership interests in businesses. These assets may not appear in obvious places like bank statements or household files, yet they represent enforceable rights that belong to the estate. A diligent search is essential to uncovering the many financial and contractual business ties that can easily slip through the cracks. Hiring Dunlap Law’s corporate attorneys becomes a necessity for many executors administering estates with complex and/or poorly documented business interests.
Best Practices for Identifying Business Interests in an Estate
1. Review Financial and Tax Records
Certain tax documents can provide a roadmap for identifying business interests, since they often disclose ventures that beneficiaries may not know exist. For example:
- Schedule C reports income and expenses from a sole proprietorship or a “disregarded entity” such as a single member LLC;
- Schedule E shows interests in partnerships, LLCs, or S-corporations; and
- K-1 forms disclose ownership percentages and income allocations for partnerships and S-corporations.
2. Search Virginia State Corporation Commission Filings
The Virginia State Corporation Commission (SCC) maintains the Clerk’s Information System (CIS), a public, online database where you can search by name to identify corporations, LLCs, and other entities. Look for any place the decedent was listed as a registered agent, member, officer or director. Be aware that entities which are not currently active in the SCC’s database can still carry obligations or hold residual value that the estate must address.
3. Locate Governing Documents
Operating agreements, bylaws, stock certificates, partnership agreements, and buy-sell agreements are often tucked away in personal files, office records, or safe deposit boxes. In Virginia, these documents are particularly important because SCC filings usually do not reflect ownership percentages or succession provisions typically found in private agreements and corporate records.
4. Exercise Rights to Access Books and Records
Virginia law, operating agreements, shareholder agreements, and partnership contracts often give owners (or, upon death, their estates) the right to inspect company books and records. Exercising this right can enable the executor to gain a clearer picture of the estate’s ownership interest.
5. Confirm Ongoing Rights and Obligations
In addition to ownership interests, executors must also identify any active agreements that continue beyond the decedent’s death. These contracts can either add value to the estate or create obligations that must be managed carefully:
- Loan agreements – if the decedent was owed repayment, the estate may need to enforce collection; if the decedent borrowed funds, the estate may need to satisfy repayment.
- Leases – whether for commercial space, equipment, or vehicles, leases often include continuing obligations or termination clauses triggered by death.
- Contractual obligations – The decedent’s business and/or the parties it contracted with may still owe payments or have obligations to perform.
- Licensing or royalty agreements – intellectual property rights can generate continuing income streams for the estate, but they must be identified and monitored.
6. Consult Professionals and Legal Counsel
Reaching out to the decedent’s personal accountant, attorney, or financial advisor can uncover business holdings, contracts, or outstanding loans that are not obvious in personal records. These professionals often have direct knowledge of the decedent’s financial affairs and can provide guidance on where to look for hidden interests. But be aware that if a financial advisor or attorney represents the company instead of the decedent as an individual, their duty is to protect the company’s interests, not the estate’s.
Instead, consider consulting with a business law attorney at Dunlap Law to guide you through the process. Dunlap Law’s corporate attorneys can help you interpret governing documents, exercise inspection rights, communicate with financial advisors and attorneys on your behalf, enforce repayment of debts, and ensure compliance with Virginia’s corporate law. Having professional support minimizes the risk of overlooking valuable assets and exposing yourself to personal liability. Schedule a consult with us, so that we can help you develop a plan for administering an estate with complex or unclear business interests.
This material is for informational purposes only. It is not intended as legal advice and does not create an attorney-client relationship between its readers and Dunlap Law. Consult an attorney before taking action on issues outlined here. This is attorney ADVERTISING MATERIAL.