If you’re a business owner then you should certainly think about what you’d like to happen with your business in the event of your death. If you don’t then there can be serious consequences. For example:
- You may pass it to someone who has no interest in running it, thus causing reputational damage to your brand.
- You may leave it to your (personal) partner who has absolutely no knowledge or experience of your business.
- You may leave multiple people trying to run the business (including your personal partner or family members), thus resulting in various conflicts as to how it should be run in your absence.
- The business could be sold for less than its actual value (again, possibly due to lack of knowledge).
Clearly, none of these scenarios will ever have a good outcome.
I’m a sole trader – does that classify itself as being a business?
If you’re a sole trader then your business will simply end when you die. That said, any business assets you might have (for example, units, offices, equipment and so on) will pass to the executors of your Will as part of the estate.
If you don’t make a Will then all these assets will pass to the administrators of your estate.
What will happen to any debts I might owe when I die?
If your business owes debts your executors will be responsible for selling any assets in order to pay your outstanding liabilities.
What if I’m in a business partnership?
This very much depends on whether or not you’ve entered into a Business Partnership. If you have, then it’s likely that your assets and business interests will be dealt with in accordance with the terms of it. For example, any remaining partner may be able to purchase your part of the business from your Executors (although this could, of course, have certain tax implications depending on the level of turnover and so on).
What sort of things should I take into account when making a Will?
Whether you’re a sole trader, limited company or in a partnership you should think very carefully about what you’d like to happen to your business when you die. For example:
- If you’re in a partnership, you should ideally have a Partnership Agreement in place. This should clearly set out what you’d like to happen with the business in the event of your death, for example, whether it should be sold in its entirety, passed to another member of your family and so on. Of course, the same scenario would also apply if your business partner passed away so it’s important to consider your own position too.
- You also need to check whether any shares could be passed over and if so that they’re not restricted by the company’s articles of association. What’s more, whilst anyone inheriting shares in a company will have a certain degree of control over it, the ultimate day-to-day decision making will remain with the surviving partners or directors.
- If you’d like the business to pass to someone else then you need to consider whether they’d actually want it and whether they have the relevant expertise to run it. If they’re likely to simply sell it – or pass it on to someone else – then you might need to think of more efficient ways of passing the value on.
- Finally, you might also want to consider life assurance, thus protecting other business partners and/or shareholders.
There are lots of considerations to take into account when it comes to business interests and for this reason it’s certainly advisable to seek professional advice.
Are there any tax implications to think about?
Absolutely. If you leave a business in your Will then your estate may be subject to a substantial amount of inheritance tax. This could ultimately mean that your executors would have to sell some – or even all – of your business assets in order to pay any outstanding liability. There are, however, certain ways of qualifying for inheritance tax relief and again, this stresses the importance of seeking good legal advice. After all, you’ve worked hard for your business, so do be sure to make it’s properly protected.
