Docklands Solicitor

- If you are a business owner or partner you may have considered leaving your business to your spouse or children through your Will, but have you really considered the consequences, and will this actually work?

- Leaving a gift in your Will of ‘my shares in my company’ when you die, may be invalid if the terms of your company’s Memorandum and Articles of Association, or your Shareholder Agreement determine a different course of action – and these documents will ‘trump’ your Will bequests.

- Do you know what provisions your company documents make? I have yet to meet a business owner that knows whether theirs make any provision for business succession. Many have just ‘downloaded the standard forms off the internet’ and signed them – does that ring any bells?

- When you die any assets in your name are frozen until after the Deed of Probate has been granted, which will be a minimum of 3 months but could take several years in complex cases. If you own a business outright and you employ people, failing to prepare for such an eventuality might mean your business would have to cease trading immediately on your death, and, as your accounts would be frozen, your staff would not get paid!

- If you are a Partner in the business, leaving your share to your spouse or children might prove a total nightmare to the other partners – consider your position if one of them was to die, would you want their spouse to take their place? If not, what provision have you made for the business to buy them out? Do you have a ‘Cross Option Agreement’ in place? And has this been phrased in such a way so as to ensure you do not lose the Business Property Relief (BPR) that would be due on your share?

- A business or interest in a business, including property (except businesses engaged in investments, land or buildings), may be fully or partially exempt from Inheritance Tax after death. Business property must be solely used for the purpose of the business and must have been running for at least 2 years. But, if that business is committed to being ‘put up for sale’ by the event of your death, your share may no longer qualify for BPR and hence would fall into your taxable estate.

- You should get your Company Documents checked by a legal professional to ensure they are going to do what you need them to do after your death, seek further advice from your accountant in relation to your tax position, and consider making Business Continuity provision in your Will.

Labels: business, children, partner, spouse, tax