Owning a business, a business interest, or shares has a real impact on how you should write your Will and plan your estate.
As a business owner, planning for the future of your company is essential—even after your lifetime. One crucial aspect of that planning is having a legally sound, well-drafted Will. Whether you’re a small business owner, shareholder, or partner, a Will provides control over what happens to your business interest upon your death. Without it, the future of your company could be left in uncertain hands, potentially putting its value, and your legacy, at risk.
Here are several reasons why it is critical for business owners to have a Will:
1. Ensure the Right People Inherit Your Business
One of the key advantages of having a Will is that it allows you to choose who will inherit your shares or business interests. Without a Will, your company or shareholding could pass to:
Someone with no interest or experience in running the business,
Multiple people who might disagree on how to manage it,
Or, the business could be sold off quickly at a poor price, reducing its value.
A well-written Will ensures that your business is passed on to the right person, be it a family member or a trusted employee, preventing potential mismanagement and preserving the company's future.
2. Aligning Business Agreements and Succession Plans
Owning shares in a business or being in a partnership adds complexity to the estate planning process. If you are part of a partnership, it is crucial to review your partnership agreement as it may dictate what happens to your business interest when you pass away. Similarly, if you own shares in a company, the articles of association and any shareholders’ agreement may place restrictions on how those shares can be transferred.
Without aligning your Will with these agreements, you could unintentionally cause conflict between the terms of the Will and the agreements governing your business, leading to disputes or delays in administering your estate. Checking and potentially amending these documents before finalising your Will is essential to ensuring a smooth transition.
3. Choosing the Right Beneficiaries for Your Business
It's important to think about whether the person or people you plan to leave your business to are willing or able to run it. If the chosen beneficiaries are unlikely to want direct involvement, there may be more efficient ways to pass on the value of your business, such as establishing a Business Will Trust.
A trust allows you to hold your business assets in a way that benefits your chosen family members without requiring them to manage the day-to-day operations. This option provides flexibility, tax benefits, and stability, especially if family members lack experience or interest in running the business themselves.
4. Contingency Planning for Business Operations
It is also important to consider your role in the business while you are still alive but possibly incapacitated. Establishing a Lasting Power of Attorney (LPA) ensures that, in case of illness or injury, a trusted individual can continue managing your business. Without an LPA, business operations could be hindered, as there would be no legal authority to make decisions on behalf of the company. An LPA safeguards the smooth functioning of your business by allowing your designated attorney to handle contracts, wages, and other critical matters during periods when you are unable to do so yourself.
5. Avoiding Intestacy Rules
Failing to create a Will means that your business will be distributed according to Intestacy Rules—laws that dictate how a person's estate is divided if they die without a Will. This could mean that someone who is not equipped or willing to run your business, such as a spouse or children with no interest in the business, inherits it. In such cases, business operations could suffer from poor management or, worse, collapse altogether. Creating a Will ensures that the business passes to those you trust to manage it effectively.
Plan Ahead, Protect Your Legacy With a Will
A Will is more than just a legal document—it’s an essential part of securing your business and protecting your family’s future. Whether you own a small business or have a stake in a partnership, ensuring the future of your company requires careful planning. By including your business interests in your Will and reviewing all relevant agreements, you can prevent disputes, reduce tax liabilities, and ensure that your company continues to thrive after you’re gone.
With proper guidance, you can create a comprehensive plan that protects your hard-earned business, your family, and your legacy. For further information or to arrange a consultation, please contact us at 01685 373721 to speak with one of our experts.