Your business is likely a major asset in your estate. You have worked hard to make it a success and it’s important to make sure that if something happens to you, the benefits pass to the right people in a timely and tax-efficient manner. A succession plan requires careful thought – so do it when the road ahead looks clear!
Below, QualitySolicitors Bradbury Roberts & Raby have compiled our top tips to think about in making sure your succession planning is as effective as possible.
Consider Your Business Type
Whether you’re a sole trader, in a partnership, or own a limited company, this will mean that your succession planning needs vary accordingly. For example, if you’re a sole trader, you need to consider whether the business would continue after your death, or whether it would be wound up or sold on.
If your business is run as a partnership, you and your business partners should have a partnership agreement in place as well as a Will. Without a detailed partnership agreement, on the death of one of you, the partnership may dissolve automatically, despite the wishes of the continuing partners.
Thirdly, with a limited company, the asset that you are leaving behind is your shares in the company, rather than the assets that the company owns. For this, you need to consider whether you want the shares to pass to your beneficiaries, or whether you want your executors to sell the shares and for the sale proceeds to pass to your beneficiaries.
Key Person Insurance
As well as making a will and considering whether you need any other documents to sit alongside it, it may also be worth considering Key Person Insurance. It could be advantageous to take out life cover which would provide a lump sum payment to your partners or other shareholders on your death, so that they have a lump sum to be able to buy your share of the business immediately following your death.
If you are going to take out an insurance policy for their benefit, you need to ensure that they do not simply keep the insurance pay-out on death – so in this case, a partnership agreement or shareholders agreement is vital.
Your business may qualify for “business property relief” so that it is 100% exempt from inheritance tax.
You should take proper advice from both your solicitor and your accountant as to whether your business assets would qualify for business property relief. The relevant assets must have been owned for at least 2 years prior to your death and the business must not just be an investment company.
Our Free Initial Assessment can provide you with an initial and basic assessment of your legal requirements, at no cost to you. It’s the perfect way to have a no obligation chat with a legal expert in complete confidence.
If you’d like a more detailed discussion with a solicitor, then take advantage of our fixed fee Ask the Legal Expert service. We can answer any questions you might have and advise you on the next steps and any costs involved.
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Why not give us a call today on 01724 854000 to talk to a Succession Planning expert. Alternatively, visit our Wills & Probate Team and Business Team pages to see how they can help you, as these departments would work together to provide the best possible solution for your business.