What will happen to my business when I die?
Whatever your business is, it is vital that you make a plan for the succession of your business on death. Part of this is making sure you have an up to date, valid will.
Many businesses can attract business relief which, in some cases, can result in 100% relief from inheritance tax. Putting the right succession plan in place and getting the right advice is vital.
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 for sole traders, partnerships and limited companies.
You may want your family to benefit from the value of your shareholding in the business, but do not think it would be appropriate for them to run the business. If that is the case, a document called a 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.
We work closely with our expert corporate commercial team who can help you to put in place a suitable cross-option agreement and to review your articles of association and shareholders agreements.
If the business is to be sold shortly after your death then we can also help you to consider the merits 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 civil partner’s estate does not pay inheritance tax on the sale proceeds on their death as they remain outside of their estate when held in trust.
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 we can also consider the merits of incorporating your business in to a limited company or becoming a partnership.
Who do I leave my business to when I die?
It is not uncommon to be involved in the running of a business and for your spouse/civil partner, or any number of your children, to not be involved at all. We assist many business owners in finding innovative ways to ensure the succession of their 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.
If you want to plan for the succession of your business, contact our team today for a free initial telephone conversation. Call 01752 203500, email enquiries@GAsolicitors.com or use our online contact form.