There are many advantages to making a will. Mostly they allow us to decide what happens to our assets after we die. The same advantages extend to wills for business owners: you can make a will to provide security over businesses when you are no longer around.
Business owners are so busy running their business and protecting their hard-earned assets that the thought of what happens to the business when they are gone can often be overlooked
| What will happen to my business if I die?
What happens will depend on how you own your business. For example, if you’re a sole trader then your business will effectively end on death. The assets and property you own for the business will pass to your executors or personal representatives. These are then likely to be sold so that business finances can be settled. Any assets remaining can then pass to the beneficiaries according to your will or to those entitled under the Intestacy Rules.
Similarly, if you are a shareholder or in a partnership, your interest in the business will pass to your executors or personal representatives. However, even if a will exists the executors/PRs will need to consider the partnership or shareholder agreement when dealing with your interest in the business. This is because the agreement will likely cover exit provisions and may even require you to include exit provisions in your will.
Regardless of the way you own your business, dealing with it in a will for business owners is the only way to ensure that it passes how you hope and plan.
| Do I need a specific business will?
It is, therefore, extremely important to consider what will happen to your shares and interest in the business and who will inherit it. Wills for business owners can prevent someone from inheriting a business that may have no interest in running it or someone that may be unable to run it.
Many business owners would prefer their family or a trusted partner to inherit the business. Incorporating this into your will can prevent your business from being mismanaged and losing its value. Along with controlling who will run your business, dealing with it in a will can also be tax effective.
Failing to include it in your will could impact the ability of the business to function correctly after your death. For example, it may take your executors some time to administer your estate. In the interim, it will be left to them to make business decisions that they may not be familiar with.
Regardless of the type of business you own, you can decide who will run it or who inherits it within a will. The person or people you choose to run your business do of course need to be willing and capable of managing such a responsibility.
There is no need to create a separate will to deal with your business. You should have one will that deals with all your assets, liabilities and wishes. However, it is likely that your will business will be dealt with distinctly to your personal assets within your will.
| What is a Business Will Trust?
One of the most effective ways to deal with a business interest in a will is to leave it in a trust. These are known as Business Will Trusts. A Business Will Trust will allow the business to continue trading and can have added tax benefits.
You will need to take care when passing your business interest in a will. In particular, you need to avoid the will conflicting with a partnership agreement or articles of association.
It is best to seek professional advice when thinking about a will. Here at Levi Solicitors, our specialist Wills and Probate team can assist with wills to suit all types of business owners