It is important to have a plan in place for your business and here is some guidance depending upon how you trade.
If you are a sole trader
Your sole trader business may include the intangible asset of goodwill. As many sole trader businesses are fundamentally “you”, i.e. people deal with you for your particular set of skills or reputation, then when you die, there may be no business to leave as such.
However, tangible assets, such as premises, stock vehicles, etc within a Sole trader business can be left easily under your Will, since any assets used for business purposes are owned by you. This type of business would form a part of your residuary estate, to be shared between beneficiaries in any way you choose.
Alternatively, you may want to leave your business as a specific gift.
If you trade through a limited company
All limited companies in England and Wales have articles of association. These specify the purpose of the company and how it should be run. The articles of association may also say what must happen to your share of the business when you die, and therefore it is important to consider this when thinking about your Will. If there are specific rules in the articles of association then these will generally override any wishes left in your Will.
Some limited companies also have a shareholder’s agreement that again deals with how the shares will be sold and to whom and on what terms, for example. For example, in some companies, these shares must be sold to the existing shareholders, rather than a new shareholder.
You cannot pass on the role of director by a Will, but the shareholders do have the power to appoint and remove directors.
If you are in a partnership
If you are in a partnership, many partnerships have a formal partnership agreement that again will set out what will happen to your share of the business when you die. The terms of this agreement will override any wishes stated in your Will.
Where you operate without a partnership agreement, the partnership automatically dissolves on the death of one of the partners. This is a key consideration and should be addressed as part of the Will making process.
Limited liability partnership
Again, all limited liability partnerships (LLP) should have an agreement or members agreement. An LLP agreement is normally designed to carry on if one of the members dies, but again this should be considered when making a Will.
To whom should you gift your business?
You also need to consider whether you want to give your beneficiaries an income from the business assets or have them take over the business.
You will need to consider if your potential beneficiaries are capable of running a business, as while they may be eager to play their part in the family business, they may lack the necessary skills or experience to take the company forward.
You may also wish to consider how the shares are split equally between your beneficiaries. For example, if you have an even number of children to whom you leave your business, and they who cannot agree on a particular matter, this would simply create a stalemate, so this should be a consideration as well when drafting your Will.
We can help with all these aspects, Will drafting, partnership agreements and shareholder agreements. For more information contact Vanessa Ruparel, a Solicitor specialising in Wills, Lasting Powers of Attorney and Probate on [email protected] or call 0118 958 9711.
Get in Touch
Vanessa Ruparel offers a fixed fee initial meeting of one hour to discuss your personal circumstances, your options and your next steps, at a cost of £95 (inc VAT).
Vanessa will meet you in our Reading Berkshire office, alternatively meetings can occur by telephone. If you would like to meet with Vanessa please telephone the office so that an appointment can be arranged.
Vanessa is a Solicitor specialising in Wills, Lasting Powers of Attorney and the administration of estates.