What happens to your sole proprietorship when you are no longer here?
Death. You would rather not think about that. Yet as a self-employed person it is smart to do it. Because what do you have to arrange when you die?
Record the death
If someone dies, the municipality must know who died. Your next of kin can do that. But usually a funeral director visits the municipality. The municipality will pass this on to the tax authorities. That is automatic. Are you self-employed? Then this message will also automatically go to the Chamber of Commerce.
Who are the heirs?
But what happens to your company after that? Your heirs are the direct owners of your company. These are your partner and possibly children. If there are none, your parents, brothers and sisters will inherit your belongings and company. The business, along with your private property and capital, is your inheritance. So with your devices and stocks, but also with all debts and outstanding invoices.
Who will be doing your job?
Most freelancers do their own work. Your next of kin usually cannot do much with your work. Yet after your death they are in charge of your business. They must continue your business. You must therefore ensure that the next of kin understand your invoices and receipts. And that they can quickly access your papers. Therefore, provide a clear overview of your administration, including all outstanding invoices and quotations. Also make sure they know which equipment belongs to your company. Also important: they need to know what your business is worth.
Automatically close a company or not?
After the 1st month of your death, the Chamber of Commerce will contact your next of kin. If your company is dependent on you, the Chamber of Commerce will automatically close your company. For example if you are the painter in your own painting company. Do your heirs still want to take over the company? Then they can object within 6 weeks. Is your company a shop, wholesaler or livestock company? Or is it not dependent on you as an entrepreneur in another way? Then the heirs may know for themselves. Do they want to continue or close the company?
Stopping the company: how does it work?
Will the company be dissolved? Then the Chamber of Commerce will pass this on to the Tax and Customs Administration. The Tax and Customs Administration will then send the heirs an invitation for the ‘final tax return’. That is a final tax return, which must be completed on an F note. The value of the company is also determined in this declaration.
The next of kin must also submit the inheritance tax return. They have to pay money on your inheritance. How much? That depends on the value of the inheritance. And of the relationship between you and your heirs.
Important: do relatives accept the inheritance?
Your sole proprietorship relies on you. That is why your business is part of your estate. So heirs must decide: do they want to accept or reject it? And then there is also a middle way: ‘accepting beneficially’. A surviving relative may not choose what to accept or not to accept. So you cannot reject the company, but you can accept the private property. Do you have a BV or general partnership? Then different rules apply.
Next of kin must know what your company is worth
But how can your next of kin make that decision? It is important that they know quickly what your company represents and is worth. If they can’t find out about your business, they don’t know what it’s worth. And then it is difficult to choose. Therefore, they can accept an inheritance beneficially. This middle way is also called ‘acceptance under privilege of inventory description’. In plain Dutch, this means that the judge gives a postponement. The next of kin can then think longer about their decision.
Inheritance tax and your business
Sometimes a business can survive the death of the owner. For example, if you run your business with someone, such as your partner or child. Then he or she may be able to finish your work. In that case, the heirs take over the company. That usually saves inheritance tax. But beware: there are rules for this. The tax authorities want the company to be continued for at least 5 years after the takeover. Otherwise, the tax authorities will still charge the full inheritance tax.