Inherited Business: Understanding Your Options & Obligations

If you're overwhelmed by inherited business decisions, a CPA can help you understand your options (keep, sell, wind down) and what tax obligations you're facing.

A diagnostic reviews everything. The CPA pulls the entity's organizing documents (operating agreement, articles, bylaws), prior tax returns (typically three years), and outstanding liabilities. This reveals the entity type, any existing elections, and whether prior returns were filed correctly.

Entity type drives every decision. Whether you inherited a sole proprietorship, LLC, partnership, S-corp, or C-corp determines your basis treatment under IRC 1014, available elections, and ongoing filing obligations. Many inheritors do not know their entity type until the CPA reviews the documents.

Time-sensitive elections may be expiring. Certain decisions -- like a Section 754 basis adjustment or an entity classification election on Form 8832 -- have deadlines tied to the date of death or the first return filed after the transfer.

The pitfall: Waiting until tax season to engage a CPA often means missed elections that cannot be made retroactively. The diagnostic should happen as soon as possible after inheriting, even if you have not decided what to do with the business.