If you are a business owner, it is particularly important to have a carefully considered Will in place so that you can be sure your business will pass to the right people when the time comes.
If you pass away leaving no valid Will, then there is a risk that your business might collapse or disputes could arise between those left behind. By planning what you would like to happen, you can take steps to avoid this and help your loved ones manage the business in the way that you would have wanted.
What to consider when drafting your Will as a business owner
You need to decide whether the person you would like to take over the running of your business has the necessary expertise to step in straightaway, as it may be that they will need training. You could start this now, but it is sensible to also put precautions in place so that someone else can help and advise initially, until your chosen successor is ready to take on the responsibility of the business.
You will also need to decide whether you want your successor to have control over the day-to-day decisions from the start. This may depend on the size of your organisation and the impact of the decisions to be made.
If the business is a limited company with other directors, then those directors will usually take control. In simple terms, with a limited company the directors deal with the day-to-day running of the business, and the shareholders are the ones who own and profit from the business. The power to make decisions on how the business is run, is split between directors and shareholders.
As a shareholder, you may be able to leave your shares to your choice of beneficiary in your Will, although this is not always the case. In some instances, the shareholders’ agreement or other company documents may give others the right to purchase your shares from your estate, or the right to block your shares passing to your chosen beneficiaries.
For a limited company, you can also consider separating the right to receive income from the business, from the shareholder’s right to vote on company decisions. If you run your business with others, it is sensible to first discuss what you all want to happen when any shareholder passes away, so that you can agree on the provisions in the company constitution documents.
Choosing who to pass on your business to
You need to think carefully about who will receive your business. They will need to have the ability to run the organisation, but it is important that they also want to take on the role.
If you plan on leaving your business to more than one individual, then you should consider whether those people are likely to work well together.
Whenever making a transfer of your assets (including an interest in a business) to someone else, it is always a good idea to take professional advice on the possible tax implications. If you transfer your shares in a business to a new owner during your lifetime, Capital Gains Tax might be payable. After death, your estate will be assessed on whether any Inheritance Tax is due. There are some exemptions, allowances and reliefs that can be applied to reduce Inheritance Tax after you pass away, but it is always a good idea to take advice on how you want to deal with your business on your death. You may be able to utilise more practical and Inheritance Tax benefits by structuring your Will properly now, as not all options will necessarily be available after you pass away.
If you have a business and you have not yet considered this in your Will, or you want some advice on your options, please contact our expert Wills team on 01252 733 770 or email email@example.com . We will be happy to provide you with details of our fees for our Wills services, and to make an appointment for you to meet one of our Wills lawyers, at our Farnham office.