So you have planned the future of your business, but what about yours?
Matthew Rose, associate at GA Solicitors and a specialist in wills, trusts, probate, asset protection and business property relief, asks the questions you need to be thinking about:
All successful businesses plan for the future. Whether it is financial forecasting, marketing plans, sales strategies or objective setting it is almost certain that you will have some form of plan for the future success of your business.
But have you considered what happens to your business on death? Many businesses have not considered the impact of losing a key individual.
Not all businesses are the same and planning will of course differ according to your circumstances. What is certain though is that every business owner should have a will. Without a will, serious complications can arise. Many businesses can attract up to 100% relief from inheritance tax so putting the right succession plan in place is vital.
A good starting point is to ask yourself some questions:
• Should the business continue or be sold?
• Who will lead the business?
• Where do I want my share of the business to end up?
The legal structure of your business will impact upon the options available to you.
If your business is a limited company then The Articles of Association should be consulted as these will determine the rights of the shareholders. You may want your family to benefit from the value of your shareholding in the business but feel it would not be appropriate for them to run the business.
In which case, a suitably drafted cross-option agreement is likely to be the solution. Here, each shareholder agrees that on death his fellow shareholders have the option to buy his shares and his estate will have the option to sell his shares to the shareholders.
If the business is to be sold shortly after your death then consider leaving your shareholding to a trust. If your business attracts relief from inheritance tax then this is a tax efficient method of ensuring your spouse or civil partner does not pay inheritance tax on the sale proceeds of the business on their death.
If your business is a partnership then you may be surprised to learn that without a partnership agreement in place your death dissolves the partnership. Putting in place a partnership agreement is highly recommended and a cross-option agreement will also assist your partners.
If you are a sole trader then you might have someone in mind to take over. It is possible to grant an option in your will for that person to purchase the business on terms that you see fit.
Whatever the case, as a business owner, you should make sure your will is accurate, up-to-date and actually reflects your wishes.
Speak to our wills, trusts and probate team by calling 01752 203500 or filling in our contact form.