Don’t Let Your Business Die With You
Research shows that the death of a business owner tops the list as the most disruptive scenario for UK businesses, with critical illness and the death of a key worker ranked closely behind.
As a business owner, it's very likely that a significant portion of your wealth, and your family's source of income after your death, is tied up in your business. The wealth of your estate could be largely dependent on how the business is dealt with after your death.
A successful business depends on good planning, and that includes planning for the unexpected. It is essential that you incorporate a contingency plan for the death of a partner just as you would devise procedures for managing your business taxes. Taking the time to reevaluate your succession and estate plan and review your insurance policies can save time, money and heartache in the long run.
For a sole trader it is very difficult to replace as very often they are the only person with the experience, skills, knowledge and contacts to make the business work. The success of the business is very often entirely dependent on the owner. The business may not have any true value without you which would enable it to be sold as a going concern. If this is the case the business would need to be wound up and any assets would form part of your estate. If it is feasible for the business to continue your Executors may have a lot to deal with and should seek specialist advice.
For a Partnership, the relationship between business partners is unique. Most business partners probably spend more time with their partner than their spouse and while your business partner may be one of your business's greatest assets, they can also be your greatest liability.
A strong partnership agreement can be extremely beneficial in this situation. If there is a partnership agreement, then the partnership will have to pay the estate what it is entitled to and the business can continue to trade. In the absence of such an agreement, the Partnership Act provides that the partnership is automatically dissolved and your family will be entitled to their share of the business.
As a business owner if you don’t make a will, the assets will pass according to the statutory intestacy rules. This may result in your assets passing other than in accordance with your wishes and may be detrimental to the interests of your business and the other partners.
By putting matters in place now you could protect your business and save your loved ones anxiety and heartache in the future. Effective planning and a well drafted Will covering all your options are important tools in regulating both your personal and business affairs and will ensure that the best solutions are in place if the worst happens.