Leaving your business in your Will
If you’re a business owner, you’ll likely want to pass your shares or business interest on to the people who matter to you. So, the question naturally arises, “Can I leave my business in my Will?” The short answer is yes, this is possible, since a business can be treated like any other asset you own, such as property or jewellery. There are, however, some considerations, which we’ll outline here.
Leaving your business in a Will
Before leaving your business to anyone in your Will, you’ll need to consider the type of business it is, and your position within it. If you’re a sole trader, leaving the business is simple, as the business assets belong to the owner. As such, they can be valued and left as part of the estate.
If you’re a partner, however, and have signed a partnership agreement, things get more complex. A partnership agreement – or shareholders’ agreement – ultimately dictates what happens to your shares when you pass away. Depending on what the agreement states, your shares may go to whomever you name in your Will, such as a spouse or children. Alternatively, it may be that the partners buy out your shares.
If you are a director and shareholder of a limited company, you may need to check the business’ articles of association to learn what will happen to your share of the company upon your death. The instructions in this document will typically override any instructions left in your Will, so ensure you are happy with them. Some articles of association may not dictate what happens when you die, in which case you’re free to specify your intentions in your Will.
When leaving a business in your Will, you’ll also need to consider inheritance tax and any other tax liabilities. These can complicate matters, so before writing your Will it’s advisable to contact a Kent accountant for Probate services to help you with wealth planning.
The current IHT threshold is £325,000, with 40% charged on any amount above this. While some relief may be applicable to the value of shares that you pass on, it’s best to discuss this with a professional.
Alongside your business’ structure and inheritance tax liabilities, you’ll need to think carefully about who you leave your shares to. If you leave them to several children, for example, the balance of power within the company is likely to shift. You’ll also need to decide whether those you would naturally choose to inherit the business are those who are best suited to determine its future. Your spouse, for example, may not want to take on the challenges of running the company or participating in key decisions. As such, you’ll need to choose a beneficiary who is capable of (and willing to) run the business and continue to develop it.
When it comes to leaving your business in a Will, don’t proceed without first speaking to a professional who can help with estate planning, such as Kent tax advisors or reputable accountants. It will make the process easier and ensure you avoid errors.