What happens to your business after you pass away?
In England and Wales, you can leave a business in your will, which becomes part of your estate when you pass away. If you’re a sole trader, the business can be left to your next of kin or whoever stands to inherit your estate. If the business is owned by a company or partnership, you may leave the shares or partnership interest in your will, usually as part of your residuary estate.
When deciding to leave a business in your will, it’s important to consult with whoever stands to inherit the business. The beneficiary must be able to take over the running of the business and meet all of its financial obligations.
It’s helpful to formulate a succession plan to decide what happens to the business. There are a few options to consider:
The business is sold: The business can be sold to a new owner. This is the most common option, as it allows the business to continue operating and the proceeds of the sale can be used to pay off any debts and provide a lump sum for the heirs.
The business is dissolved: The business can be dissolved, which means that it is closed down and its assets are sold off. This may be the best option if the business is not profitable or if there is no suitable buyer.
The business is inherited as a going concern: The business can be inherited by the deceased owner's heirs. This can be a complex process, as the heirs may need to agree on who will run the business and how it will be divided.
The business is placed in a trust: The business can be placed in a trust, which means that it will be managed by a trustee, such as a business parter, for the benefit of the deceased owner's beneficiary. This can be a good option if the beneficiaries do not have the time or experience needed to manage the business themselves as a going concern.
The succession plan will typically depend on the specific circumstances of the case, such as the type of business, the value of the business, and the wishes of the current owners.
By planning ahead, you can make sure that your business is handled properly after you pass away.
You should also make sure:
You have a plan in place for what will immediately happen to your business if you pass away.
You appoint a trusted person to be the executor of your will and to manage your business after you die.
You keep your business's financial records up to date.
You take out any necessary business insurance.
You consider taking out a life insurance policy to cover any personal liabilities.
If you plan to leave a business in your will, you should ideally take advice from a will writer or solicitor to make sure that your will is drafted correctly and that the business will be transferred to the beneficiary smoothly. We can help you to set-up a Business Trust as part of our Advanced Will product.
