Having a plan for your business after your death is important. Perhaps you want your children to be your successor and the company to continue in their name.
Or maybe, if you’re a partner or shareholder, you might want your spouse to take your share of the business.
Can I leave my business in my Will?
Yes, just like most assets, it is possible to leave a business in a Will. But this depends on how the business is set up and what position you hold at the company.
If you own and run your business yourself, making you either a sole trader or sole director, you will be able to pass on your company through a written Will.
However, if you’re one of many partners or shareholders in a partnership or limited company; you won’t be able to pass on the entire company, just your share of it.
What happens to a sole trader business when the owner dies?
When a sole trader passes away without a Will in place, their business will be handled in accordance with Intestacy Rules.
Intestacy Rules are a set of legal rules that dictate who inherits what from your estate and how much, without any input from you.
As a sole trader, it is especially important to have a Will in place to ensure that your assets are passed on how you wish; not in accordance with intestacy rules. The intestacy rules may not reflect how you wish to leave your estate so it is essential to have a Will in place.
Further in a Will, the authority for the Executor (person handling the administration of your affairs) comes from the Will itself. A properly drafted Will can give authority for the Executor to start acting in relation to the business as soon as you have passed away and therefore continue the business to help minimise any disruption.
The risks of not having a Will
Without a Will there are no Executors or powers for the Executors to act. This means that the Administrator (person handling the administration of your affairs when there is no Will) does not have authority until they have received the Grant which can often take a lengthy time to obtain.
Furthermore, the powers they hold may not be as you have intended so they are restricted in handling your affairs. This may cause complications if matters of your business need handling during this period.
You can complete our free intestacy flowchart, to see how your estate and assets will be divided without a Will in place, here.
What happens to a limited company when the owner dies?
When a shareholder or partner dies in a limited company or partnership, and they don’t have a Will in place, their share of the business will again be divided in line with intestacy rules.
But what if you want to choose who your share of the business is passed on to?
How do you include a business in a Will?
In the full article, Rhiannon outlines how to include a business in a Will, tax implications & relief and more. Click here to read it.