What will happen to my business when I die?
This is, of course, not the most cheerful of topics to write about, however it is incredibly important.
What you decide to do with your business, and what you are allowed to do, will usually depend on how you own the business, with different rules in place for sole traders, partnerships and limited companies.
It is also incredibly important to ensure you gain professional advice as many businesses attract business relief, in some cases resulting in as much as 100% relief from inheritance tax.
You may want your family to benefit from the value of your shareholding but think it would be inappropriate for them to actually run the business. If this is the case, a cross-option agreement should be considered. Here, each shareholder agrees that on death their fellow shareholders have the option to buy their shares and their estate will have the option to sell the shares to the shareholders.
If the business is to be sold shortly after your death then you should also consider the benefits of 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 partner’s estate does not pay inheritance tax on the sale proceeds.
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 from you. If you do not wish that person to disproportionately benefit from your estate, then it is possible to grant an option in your will for that person to purchase the business on terms that you see fit.
As a sole trader, your business is very vulnerable on death and if you wish it to continue as a going concern then it could be worth considering the merits of incorporating your business in to a limited company or partnership.
Who do I leave my business to when I die?
This is often one of the biggest concerns, particularly as it is quite common for spouses, partners and children to have no involvement in the business. Your legal advisor should assist you in finding ways to ensure the succession of the business provides a fair outcome for the whole family. We take in to account any wishes you might have to ensure that family members involved in the business will continue to benefit from their hard work, whilst also ensuring that those not involved do not miss out on the inheritance you want them to have.