As a small business owner you don't just need a will, you need to be sure your business will be able to continue even after the worst happens.
When the sole director of Cimarron UK Ltd died without these arrangements in place, her executor had to incur the cost and uncertainty of going to court. The company’s articles of association did not permit the executor to act as a shareholder or to appoint a director to run the company. This left the company without any shareholders or directors and facing a very real risk that it would have its assets frozen and be forced to cease trading.
Luckily, the court’s decisions allowed the executor to be registered as a shareholder and appoint a new director. However, the case gives a clear indication of the risks and potential costs that can follow when a company’s articles of association and a shareholder’s will do not provide sufficient clarity.
What will happen to my business on my death?
If the business is a sole trader, it ceases to trade on death but the assets can be sold as part of the estate. A business trading as a partnership without a Partnership Deed that enables the surviving partners to continue will terminate on death.
Therefore it is vital that you get your will and company structure in order to ensure that either your company can continue to run smoothly, or to protect your executors from stress and financial costs.
Can I leave my business in my will?
Sole trader businesses are the simplest to deal with when writing a will, as any assets used for business purposes are owned by you. You can leave this type of business as part of your residuary estate when using our online will writing service. This can then be shared between your beneficiaries in any way you choose.
However, Passing on a business in your Will can mean that your estate has to pay a substantial amount of Inheritance Tax. In some cases, your executors may even have to sell business assets, shares or interests in order to pay that Inheritance Tax. Therefore we recommend seeking legal advice when putting your will in place if you intend to add your business.
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Please get in touch with our commercial lawyers if you require advice generally or help in drafting commercial contracts or terms and conditions.