Business Interests and Your Will

Running a business is never easy, and for many people it is one of their most valuable assets. It is therefore important to understand what happens to your business interests when you pass away, and how they are dealt with under your Will.

Below is an overview of how different types of business interests may be treated under a Will in England and Wales.

What happens to my company when I die?

Sole trader

If you operate as a sole trader, your business has no separate legal identity from you personally. This means:

• All business assets and liabilities are owned by you personally.
• On death, they form part of your estate.

A sole trader business will usually fall into the residuary estate, meaning it will be distributed to your beneficiaries in accordance with your Will.

Leaving a business, or part of it, to a specific individual may require additional checks, tailored drafting and professional advice.

Limited liability company

A limited company is a separate legal entity. You do not own the company itself, but rather shares in the company.

When you pass away:

• Your shares normally form part of your estate.
• They are distributed according to your Will unless there are restrictions in place.

It is important to review the company’s:

• Articles of Association, and
• Any shareholders’ agreements

These documents may contain provisions dealing with:

• What happens to shares on death,
• Rights of other shareholders to buy your shares, or
• Mandatory transfers.

If such provisions exist, they will usually override what is written in your Will.

If no arrangements are in place, your shares will generally fall into your residuary estate and be distributed under your Will.

Leaving specific shares to named individuals may require tailored drafting and professional advice.

Partnership

If you are a partner in a business, there may be a partnership agreement in place.

• A partnership agreement often sets out what happens to a partner’s share on death.
• If so, those terms will usually take priority over your Will.

If there is no partnership agreement, the partnership may automatically dissolve on death, and:

• Your share of the partnership assets will form part of your estate, and
• Be dealt with under the residuary clause of your Will.

Like a sole trader, a traditional partnership does not have a separate legal personality (unlike an LLP).

Where do I include my business in my estate plan?

It is important for your executors to know that you are running a business.

Record the details of your business in a separate asset list. By including the company’s name and other details, your executors would be able to manage and deal with your business in a smooth and efficient manner.

Frequently Asked Questions (FAQs)

Can I leave my business to someone in my Will?

Yes, but how this works depends on the type of business and any governing agreements. In many cases, additional drafting and professional advice are appropriate.

Does my Will override shareholder or partnership agreements?

No. Company and partnership agreements usually take priority over the Will.

Will my business be subject to inheritance tax?

Possibly. Business Property Relief may apply, but this depends on the nature of the business and ownership structure.

Can my executors run my business after I die?

Executors can deal with business assets, but management powers depend on the business structure and governing documents.

Do I need a separate business succession plan?

Often yes. A Will alone may not be sufficient for smooth business continuity. We suggest speaking with your Company Secretary and Accountant.