If you are a business owner, then it is particularly important to have a carefully-considered Will in place so that you can be sure that your operation will pass to the right person when the time comes.
If something were to happen to you and you had not left a valid Will, then there is a risk that your business could collapse or disputes could arise between those left behind. By planning what you would like to happen, you can take steps to avoid this and helped your loved ones manage the business in the way that you would have wanted.
What to consider when drafting your Will as a business owner
You need to decide whether the person you would like to take over the running of your business has the necessary expertise to step in straightaway. It may be that they will need training. You could start this now, but also put precautions in place so that someone else can help and advise initially, until they are ready to take on sole responsibility.
You will also need to decide whether you want your beneficiary to have control over the day to day decisions from the start. This may depend on the size of your organisation and the impact of the decisions to be made.
If the business is a limited company with other directors, then they will take control. You may be able to leave your shares to your choice of beneficiary in your estate although this is not always the case. In some instances, the shareholders’ agreement may give other shareholders the right to block the passing of shares to your beneficiary or the right to purchase these from your estate.
The type of shares and the shareholders’ agreement will also determine whether the shareholders are entitled to a say in the decisions that are made and whether they can veto certain decisions. A shareholders’ agreement takes precedence over a Will.
Choosing who to pass on your business to
You need to think carefully about who will receive your business. They will need to both have the ability to run the organisation and also want to take on the role. If you plan on leaving it to more than one individual, then you need to be sure they will be able to work well together. You may be able to start helping them into the roles they will assume in advance.
You will also need to consider what share to leave each individual. While you may want to be fair and leave everyone an equal share, this could mean that no-one has a majority interest and the situation could be difficult if the parties disagree. The business could be paralysed if a decision cannot be made.
It is recommended to look at the tax implications in respect of a business transfer. If shares are moved to a new owner during your lifetime, there may be Capital Gains Tax payable. After death, there may be some tax relief available, but Inheritance Tax is likely to be payable.