No one wants to think about dying, but have you thought about what would happen to your business, as well as your family, if you died?
Much will depend on if your business is a sole trader, partnership or company, but have you thought about whether the business could run without you on a day-to-day basis, even if you do have partners or co-shareholders/directors? Do they have the same or similar skills to you? Do they have access to your computer, client files, or the business bank account so payments can still be made?
From a practical perspective, it is good planning to sit down with your business partners, directors, shareholders or trusted employees and discuss what would happen if any of you were to die.
Would the business have to be sold either immediately or in the long-term? Who would run it in the meantime and how would they do this? In the case of multiple owners, would you all want each other’s spouses or children to inherit the business interest and join you at the table, making decisions?
From a legal perspective, you also need to consider matters and get the paperwork lined up, just in case.
If a business owner fails to make a will, and so dies intestate, they won’t necessarily be able to ensure that the value of the business interest, whether sole trader, partner or shareholder, passes to the person they would want. The intestacy rules are a valuable back up, but they are no substitute for reviewing your business documents, such as the partnership agreement, and then making a will. You can then decide who will deal with matters on your death and crucially, who inherits your assets (and at what age or, if in trust, for children).
Who receives your assets under the intestacy rules depends on the family you have and the value of your assets. Spouses don’t necessarily inherit all of your assets and if you have no family, everything will go to the crown. Unless you are married or in a civil partnership, your ‘other half’ won’t receive anything: a ’common law spouse’ is a myth that the law doesn’t recognise.
With a well thought out will, steps can be taken to ensure that the ownership and control passes to the business co-owners. Instead of a co-owner’s spouse or children inheriting the business interest and so becoming involved in running the business (or looking to sell it), you can instead provide that the co-owners buy the interest out. This enables the family, either directly or through a trust, to receive the value but not the responsibility of the business interest.
In the case of a partnership, it will be dissolved fully by the death of a partner and come to an end, unless there is agreement to the contrary in a partnership agreement, This aspect should be considered ahead of the death of a partner.
Everyone, and especially business owners, should obtain detailed advice from a knowledgeable, qualified adviser on their particular circumstances so they plan for the future in a coherent, comprehensive way.