Inherited a Business? What to Do First and What to Consider
The quick answer
If you've inherited a business, keep it running first: secure bank accounts, payroll, key employees, and customers. Then get a professional valuation as of the date of death, which determines estate tax and sets a stepped-up cost basis that can reduce capital gains tax if you sell. Finally, confirm how ownership transfers, check for debts, and decide whether to keep the business, sell it, or hire management.
What should you do first after inheriting a business?
Focus on stability, not big decisions.
Confirm who has authority: Until ownership transfers, the executor or trustee usually controls the business.
Secure the finances: Make sure payroll, vendor payments, and customer collections keep flowing.
Reassure key people: Talk to key employees, major customers, and suppliers.
Gather documents: Operating agreements, tax returns, financial statements, loans, leases, and insurance policies.
If the business was a sole proprietorship, you may need a new EIN, bank accounts, and licenses to keep operating.
Why do you need a business valuation?
A qualified appraisal sets the business's value on the date of death, which determines estate tax and your new cost basis.
The step-up in basis: Inherited property generally takes a basis equal to its value at death. If you inherit a business worth $3 million and sell it shortly after for $3 million, there's little or no capital gains tax.
Entity type matters. Sole proprietorship assets step up directly. Partnership assets step up only if the partnership makes a Section 754 election. S corporation shares step up, but the company's assets do not.
Will you owe estate or inheritance tax?
Federal: The 2026 exemption is $15 million per person, so most estates owe nothing. The estate pays any tax, not the heir.
New Jersey: No estate tax, but an inheritance tax of 11% to 16% can apply to heirs such as siblings and non-relatives. Spouses, children, grandchildren, and parents are exempt.
New York: Has its own estate tax, with a much lower exemption and a "cliff" that can tax the entire estate.
If a family business makes up a large part of the estate, Section 6166 may allow federal estate tax to be paid over as long as 14 years.
How does ownership of an inherited business transfer?
It depends on the paperwork. A will goes through probate, while a trust usually transfers faster and privately. Operating, shareholder, or buy-sell agreements may restrict who can own the business or require you to sell to the other owners at a set price.
Also check for business loans, leases, and personal guarantees, and watch tax deadlines. For example, S corporation stock held in a trust must meet specific rules on time to keep S status.
Should you keep, sell, or hire someone to run the business?
Once the business is stable, decide which path fits:
Run it yourself: if you have the skills, interest, and time.
Hire management: keep ownership and income without running daily operations.
Sell it: turn an illiquid asset into cash. Thanks to the step-up, selling soon after inheriting often creates little tax.
Ask yourself whether you want the job, whether the business can succeed without the previous owner, and how much of your net worth it would tie up.
What if you inherit the business with family members?
Agree early, in writing, on who manages the business, how decisions and profits are shared, and how one heir can buy out another.
An inherited business can also reshape your finances. Revisit your income, taxes, insurance, and estate plan, and plan how to diversify if the business becomes a large share of your net worth.
Frequently asked questions
Do I pay income tax on an inherited business? No. You owe tax on profits earned after you own it, and on any gain above your stepped-up basis if you sell.
Am I responsible for the business's debts? Not personally, unless you sign a personal guarantee or take on the debt yourself.
Can I sell an inherited business right away? Often, once you own it or the executor has authority to sell. The step-up in basis usually keeps capital gains tax low.
Get help with an inherited business
Inherited a business and not sure whether to keep it, sell it, or how it fits into your finances? Reliant Wealth Advisory helps families work through these decisions with a clear plan.
Click here or book a time below:
About the author
Michael Walstedt, CFA, CFP®, is the founder of Reliant Wealth Advisory, a fee-only fiduciary firm in Hoboken, New Jersey. He helps business owners, executives, and tech professionals in the New York/New Jersey area, as well as nationwide, with financial planning and investment management.
This article is for educational purposes only and is not tax, legal, or investment advice. Tax rules change, and your situation may differ. Consult a qualified tax professional and estate attorney before acting.
