• Death of sole proprietor - transfer of firm

Please advise me on the below scenarios. 

My father used to run a small firm (oil Mill) in Andhra Pradesh from the last 30+ years. He was the sole proprietor. He died 2 weeks back. We need advice on the below matters. 

1.	How can we transfer the firm to my Mothers name ? She would like to continue to run the factory. 
2.	There is a stock worth more than 10 Lakhs in the factory ?. what happens to this stock? When Can we sell the stock? 
3.	What will happen to the licenses/approvals which we got earlier for the firm ? : ex: Boiler License. Pollution license. 
4.	We have taken insurance on the factory (fire and marine cargo) and they are recently renewed. If my mother runs the factory will the factory still cover by insurance till the next renewal ?.
Asked 1 year ago in Business Law

2 answers received in 10 minutes.

Lawyers are available now to answer your questions.

17 Answers

1. ALL the residual Legal Heirs (children) of Father, can execute a registered "Release Deed" in favor of Mother, permanently relinquishing all their rights over all property, including Prop. Firm, alongwith Assets & Liabilities, floating & fixed Stocks, all relevant licenses & permits etc....

2. Based on this registered Release Deed, Mother can conduct all proceedings to change name of prop. in her own name, in all the relevant authority offices, income tax, GST, etc....

3. Based on above point no. 1 & 2, ALL existing licenses, permits, insurance coverage, liabilities will run as usual without any interruptions. 

Hemant Agarwal
Advocate, Mumbai
5567 Answers
25 Consultations

5.0 on 5.0

No legal formalities are required. Unlike a company, there’s no legal difference between a sole proprietorship and its owner. To transfer ownership of the business, one should transfer the ownership of the relevant assets. So the proprietor has to note down the following things before transferring his ownership.

 

Like Pan Card, GST Number, All license and factory Insurance , Initially it will get transfer on all legal heirs name and among all children can give powers to run the business.

Ganesh Kadam
Advocate, Pune
12219 Answers
165 Consultations

4.9 on 5.0

 - Sole proprietorship is owned by an individual and the proprietor is personally liable for all the debts and responsibilities of the firm and the business and further the business identity i.e. trade mark and the owner hold single identity and not different, which means that all the property possessed in the name of the firm belongs to the proprietor alone.

- After the death of your father intestate , his property /assets would be devolved upon his legal heirs , i.e. your mother and your & other sibling if any. 

- For removing any dispute in the future and to run the business solely in her name , you all siblings can execute a Release deed , but specially for the business not needed. 

1. Legally there is no distinction between the sole proprietorship and the owner himself , and when the sole proprietor dies, the business technically dies also.

- Hence she can continue the said firm after changing the bank account , PAN card etc in her name .. The trade mark of the firm will be automatically transferred in her name , however you can change the same legally. 

2. You and your mother is entitled to deal the business as per your requirement , and there is no boundation for the same in the sole proprietor business. 

3. You can move an application before the competent authority to convert the ownership of the firm from your father to your mother after submitting the death certificate. 

4. Yes 

Mohammed Shahzad
Advocate, Delhi
8461 Answers
92 Consultations

5.0 on 5.0

As per section 22(3) of the CGST Act, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession, where a business is transferred to another person for any reasons including death of the proprietor. While filing application in FORM GST REG-01 electronically in the common portal the applicant is required to mention the reason to obtain registration 

2) in case of death of sole proprietor his property would devolve on his legal heirs 

 

3) you can execute gift deed for your share of property in your mother name 


4) your mother can sell the stock 

Ajay Sethi
Advocate, Mumbai
84881 Answers
5611 Consultations

5.0 on 5.0

He need to execute gift deed. 

Yes you can sell it if you have control over operation

It needs to be renewed. 

Yes it will be covered

 

Prashant Nayak
Advocate, Mumbai
24892 Answers
58 Consultations

4.4 on 5.0

1. Proprietorship devolves upon all the legal heirs in equal share. Now to make your mother sole owner of the factory you need to relinquish your respective shares in favour of your mother by way of a registered deed.

2. Thereafter your mother can apply for trade license and other certificates in her sole name.

3. This may required further NOC on affidavit from your sides.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
366 Consultations

5.0 on 5.0

afterdeath of the sole proprietor, his legal heirs can legally continue the business. However, there will be certain issues with GST registration, income-tax and such like. It is, therefore, advisable for the legal heirs to form a fresh partnership firm and take over the assets and the liabilities of the sole proprietary concern. legal heirs can execute registered gift deed in favour of Mother. 

Mohammed Mujeeb
Advocate, Hyderabad
19012 Answers
31 Consultations

4.5 on 5.0

1. Get a legal heire Certificate and get the required transfers done on that basis. If that doesn't work than file a declaration suit for declaring the ownership of the firm.

2. First get the required transfers done.

3. Those will also be transferred. 

4. Yes

Rahul Jatain
Advocate, Rohtak
5365 Answers
4 Consultations

4.8 on 5.0

That can be done. Engage a lawyer who will do the necessary paperwork. The sole proprietorship firm's assets and liabilities are transferred to its legal heirs.

All will be the same. The firm shall be transferred to your mother. You all must sign on the papers.

Rahul Mishra
Advocate, Lucknow
13199 Answers
47 Consultations

5.0 on 5.0

As per the facts of the case and information, you and your mother is legal heirs of your late father.

Please approach High Court for the Succession Certificate.

Please check nominations in Bank and all Government offices and departments made by your late father and claim the nomination. 

Please apply to all office and Government departments for the transfer of ownership to your mother by affidavit and your NOC.

If your are two legal heirs then with immediate effect to take charge of stocks in trade and may sell it the day you and mother want.

It would continue in the name of your father untill renewal. Please inform all Government officials and departments demise of your late father in writing expressly under the acknowledgment from all concerned department. 

Insurance policy would continue and renewable with the change of ownership by nominee. 

Ramesh Pandey
Advocate, Mumbai
2541 Answers
8 Consultations

5.0 on 5.0

1. Since he was a sole proprietor the firm devolved on his Class 1 heirs (widow and all children) equally if he died intestate.

2. You are free to transfer your share to your mother through a registered gift deed.

3. The stock can be sold by heirs.

4. The licenses will continue to remain valid except where they are required to be periodically renewed.

5. The insurance will also remain valid, but you should inform the insurance company about the demise of your father.

Ashish Davessar
Advocate, Jaipur
30752 Answers
923 Consultations

5.0 on 5.0

Hi

In law, the legal heirs of your father are entitled to continue the oil mill of your father and 

1) You should apply to register of firms to transfer the proprietary firm to your mother by submitting the documents mentioned below

2) All stocks can be sold by the legal heirs of your father.

3) You should apply to respective authorities for transfer of boiler license , pollution license etc to your mother's name by submitting the documents mentioned below.

4) You can also get the insurance on factory transferred from your father's name to your mother's name. 

5) Required documents are 

a) Your father's death certificate. 

b) Family member certificate of your father (wherein the names of legal heirs of your father is provided by Mandal revenue officer)

c) Name transfer applications for proprietorship, boiler licenses, pollution , GST , and other applicable licenses.

6) You can also approach the district court and apply for succession certificate for all the properties of your father including the oil mill and if all the legal heirs agree to transfer the property to your mother, court will direct transfer of all licenses pertaining to your mother . In districts, issue of succession certificate will not take more than 6 months. 

Hope this information is useful. 

Rajgopalan Sripathi
Advocate, Hyderabad
2124 Answers
394 Consultations

5.0 on 5.0

 In case of death of the sole proprietor, his legal heirs can legally continue the business but other legal compliance, either fresh firm will  form or legal heirs will replace.

Do you have incorporation certificate/registration certificate of firm ? You have to apply in same office which have issued certificate enclosing death certificate and legal heir certificate if required by authority. On giving NOC, firm will transfer in mother sole name.

If only owner will transfer than you can continue with old licenses/approvals. Only need to inform the concern authority about change in ownership.

But for insurance purpose, policy mandatory be replaced by new owner. 

Yogendra Singh Rajawat
Advocate, Jaipur
21452 Answers
31 Consultations

4.4 on 5.0

1. All legal heirs can give affidavit to tranfer firm on name of wife of deceased proprietor of firm.

2. You can continue the operation of factory even before transfer of ownership. 

3. They will continue on name of firm. 

4. Yes factory will be covered under Insurance.

Mohit Kapoor
Advocate, Rohtak
10688 Answers
7 Consultations

5.0 on 5.0

In case of death of sole proprietor, if the business is continued by any person being transferee or successor of business, it shall be construed as transfer of business.

This means transfer of unutilised input tax credit and liability to pay tax along with penalty, if any, will also be possible

transfer or change in the ownership of business will include transfer or change in the ownership of business due to death of the sole proprietor.

A circular issued by the Central Board of Indirect Taxes and Customs (CBIC) mentioned that the transferee or the successor, will be liable to be registered with effect from the date of such transfer or succession, where a business is transferred to another person for any reasons, including death of the proprietor. Here the applicant will be required to mention the reason to obtain registration as ‘death of the proprietor,’ in the registration form (GST REG-01) to be filed electronically in the common portal.

The legal hire (of the dead sole proprietor) will be required to give application for cancellation of the existing registration. The GST Identification Number (GSTIN) of transferee to whom the business has been transferred is also required to be mentioned to link the GSTIN of the transferor with the GSTIN of transferee. In case of death of sole proprietor, if the business is continued by any person being transferee or successor of business, it shall be construed as transfer of business. 

Further, such persons would be required to pay all liabilities due from them for the relevant period in case they apply for revocation of cancellation of registration. Hence, to avoid payment of the tax liabilities, such persons may be using the route of applying for fresh registration. One can take separate registration on the same PAN in the same State.

 

T Kalaiselvan
Advocate, Vellore
74999 Answers
1257 Consultations

5.0 on 5.0

Dear Sir,

While running the firm, your father might have current bank bank accounts, GST and other various formalities and compliance. He might be taking help of the CA as well for this. Hence, you may take help of your CA to know the previous details, And the next action will of  acquiring the proprietorship from father to mother. For this, you are required to submit the details of the mother with documents such as PAN Card, Aadhar Card, death certificate of father, affidavit, legal heir certificate as required asked by the concerned department. Thereafter the mother can become the proprietor of the firm. The assets or the stock of the firm can be sold thereafter by the mother and the licenses/approvals of various things will be continued and the same is applicable to insurance as well. 

Ganesh Singh
Advocate, New Delhi
6629 Answers
16 Consultations

4.5 on 5.0

You need to fill up the application to replace the names with the concerned authority,

regards

Swarupananda Neogi
Advocate, Kolkata
2935 Answers
6 Consultations

4.7 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer