Key Considerations for Business Owners
The most common business types are sole traders, partnerships and incorporated companies. Depending on the businesses structure, documents such as shareholder agreements, partnership agreements and articles of association usually set out the basis for how it is owned and managed. It is also possible for these documents to dictate what happens to each owners’ share in the business should they die.
In our experience, these terms are often draconian, leading to forced buy outs, depreciation of value and occasionally even dissolution of an owners share with no benefit to their heirs. It is therefore important to ensure there are adequate business documents with appropriate options for your heirs and surviving business associates to consider on your passing.
It is also important that you deal with your business properly within your Will to ensure that it is administered effectively and passed to your intended heirs. The contents of your Will should reflect the options contained within the business documents and provide heirs with the appropriate legal route to maximise the value of their inheritance.
Below are examples of some of the things you should consider:
Other Business Interests
The above considerations are not just important for people who own a business. They are also necessary if you have business interests such as rental properties, investment portfolios and other stocks and shares.
The way in which these assets are owned will have just as much impact on how they are inherited and how much inheritance tax is paid on your death. For example, rental properties will not necessarily qualify for special inheritance tax reliefs. An effective solicitor can help you structure your portfolio to not only maximise the use of tax reliefs during your life time, but also ensure a smooth transition to your beneficiaries so that they do not pay more inheritance tax than they need to. At Allard Bailey Family Law, we achieve this with a combination of lifetime planning and implementation as well as succession planning through effective Wills.
A Special Note on Investment Portfolios
Investment portfolios are often held in a variety of structures, depending on what your financial advisor believes to be most effective for each investment. If your advisor does not have an overview of your entire estate, it may mean that you minimise your liability for one tax, whilst inadvertently increasing the liability for another tax. It is therefore advisable for your entire estate and holdings to be reviewed periodically.
You should also be aware that if your investments are held in trust they will fall out of your estate so you cannot dictate how these assets are dealt with in your Will.
To ensure that your wishes can be carried out in the best way for you and your beneficiaries, it is advisable to seek professional advice when considering how to plan the succession of your business and other investments. It is also advisable to prepare a detailed Business Lasting Power of Attorney to protect your business in the event of unforeseen absence caused by sudden incapacity. For more information on how we can assist you please contact Sangeeta Rabadia.
Filed Under: Insight
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