Why you need a Will for your business
Posted on 23rd February 2021
A valid Will makes it much easier for your executors to administer your estate when you die. Your friends and family will receive their inheritance as you intended, and people will be reassured that they understand your wishes.
There are almost six million businesses in the UK, most of them ranging from sole traders to businesses with around 10 employees, but many people don’t put the same measures in place for their business.
What happens to your business when you die
left to one or more beneficiaries in your Will. However, it will be a good idea to take some advice before including your business in your Will.
If you own a limited company the memorandum and articles of association will specify the purpose of the company and how it should be run. The articles of association might say what should happen to your share of the business when you die, so it’s important to check this when you plan to write a Will.
If the articles of association include what should happen to the business when you die, this will usually overrule your Will. If the articles of association don’t include this information, you can add your wishes about how your business should continue in your Will.
If you have a formal partnership agreement it will specify what will happen to your share of the business when you die. The terms of this agreement will override your Will, so it’s important to make sure you take the time to read it carefully. If you don’t have a formal agreement the partnership might have to cease trading when one of the partners dies.
A limited liability partnership should have an LLP agreement to make sure it can continue if a member dies, so you should check the terms before writing your Will.
Can I leave my business as a gift?
If you’re a sole trader or the sole director of a limited company, you can normally leave your business as a gift to one or more people.
If you want your business to continue trading after you die you should ideally have a succession plan and make sure that everyone involved is aware of your wishes. If you leave the business to family members who haven’t previously worked with you they will need to learn what’s required. You might need to make provision for support from trusted employees who can help them to run and grow the business in the future.
Your executors should be aware of your plans for your business. You will probably need some professional advice if you:
want to pass on your entitlement under a business agreement
you are planning to make your beneficiaries shareholders before your death
you are considering placing your business into a trust
there are inheritance tax implications for the value of your business assets
you own a farming business.
A letter of intent
You can write a letter of intent to keep with your Will. While it won’t be legally binding you can use it to make sure that executors fully understand your wishes. You could include, for example, your intentions for:
the appointment of an independent chairman
rate of expansion
You can also include more practical things like critical passwords and details of bank accounts.
If you would like advice about making provision for your business in your Will please get in touch.
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