Business Property Relief may be available on certain businesses and business assets.
This is where you own the business but will not usually have any employees for example a self-employed plumber or hairdresser. You are the owner so there are no restrictions on who you can leave the business to. You can decide to appoint a special executor who can continue to run the business and to provide income to the beneficiary or else you may wish to leave the business (or assets) direct to a specific beneficiary. If not, a business that was owned by you will automatically fall into your residuary estate when you die and be dealt with under the terms of any Will you have done.
If you owned the business with one or more other people, and the business was managed between you, then this may fall into the category of a partnership. This business structure may also have unlimited liability, with the owners personally responsible for debts and personally entitled to a share of any profits.
Businesses providing professional services such as solicitors, accountants and doctors are commonly structured as partnerships. There should be a partnership agreement which sets out the financial details, including what contributions each person has made, who is liable for certain liabilities and how profits will be shared.
The agreement should state if the partnership is to continue after the death of a partner and typically will provide options for the surviving partners to purchase your share. It may also include mechanisms for the share to be valued and for payment to be made to your beneficiaries. This will assist the surviving partners to retain control of the business. Such an agreement can be used in conjunction with a life insurance policy to ensure that the other partners have the funds to purchase the share. If there is no partnership agreement or if it does not provide for what is to happen on death, then the partnership will dissolve on the death of one of the partners.
A limited company limits the liability on the business owner (unlike sole traders and partnerships). This means that the business itself takes on debts or profits and this is separate to the finances of the owners.
A limited company can be set up in one of two ways; either as a private limited company or as a public limited company. A private limited company is likely to be a small, independent business while a public limited company might be a large, well-known company that trades on the stock-exchange.
If you own shares in a private or public limited company then you may not have be involved in the day to day running of the business, but the shares will form part of your estate and can be sold or transferred on your death.
The procedure when a shareholder dies may be recorded in the company documents and could contain restrictions on who can have the shares on death. For example, they might specify that the other shareholders have an option to purchase your shares.
You should check that the company documentation does not create a situation where your death causes your interest in the business property to cease unless that is your wish.
In the absence of restrictions in the company documentation, you may decide to gift your shares to a specific beneficiary if you want the business to continue on your death but, bear in mind that the beneficiary may want to sell the shares and have the money instead.
Another option, if there is more than one beneficiary to consider, may be to give one beneficiary the option to buy the shares from the estate.
If you own 100% of the business, you might decide to split your share equally between various beneficiaries.
It is important to consult with a legal professional when making a will especially if you have a business, as they can guide you through the process, ensure that all the document is properly prepared and executed, and help you understand the legal implications involved.
Katherine Oakes is able to offer as free initial meeting to discuss your affairs.
Please note that the information provided is for guidance purposes only and should not be construed as legal advice