What should be considered when setting up Wills for business owners?
The process of preparing a Will that will provide adequately for their family can seem daunting enough to most people, but where there is a business involved the number of issues that need to be considered increases. Many employers and business owners have enough on their plate running the businesses without having the opportunity to give proper thought and consideration to what would happen not only to their estate generally but to their business on their deaths. However, good advice can help to clarify the issues and simplify the process.
The benefits of forward planning
A Will for business owners should ideally be part of a succession planning process which is reviewed regularly to take account of changes in personal circumstances and the growth and development of the business.
Therefore, the preparation of a Will for someone who owns and runs their own business is likely to involve more than just deciding who should inherit the value of the estate and go deeper to explore how best to ensure that the real value of the business can be retained and transferred to the intended beneficiaries in the manner intended.
For example, some business owners are aiming to create a business that they can pass on to the next generation whereas others see the business more as an investment that will ultimately be sold and they will want the proceeds of sale to be passed on to the family. Any Will planning needs to take into account the individual objectives of the owners of the business concerned.
Family business
If the intention is that the business will be left to members of the family then issues such as:
- whether the structure of the company, if there is one, permits this;
- whether there is in fact anyone in the family who is willing and able to take on the business;
- the tax consequences; and
- whether any additional funding would be required.
These are some of the many factors that ought to be taken into account.
Investment business
If ultimately the idea is that the business would be sold on the death of the owner then:
- To whom will the business be sold?
- Does that person have the capital available to fund the purchase?
- If the intended purchaser is unlikely to be involved in the running of the business then who would run the business between the death of the business owner and the sale in such a way as to maintain its goodwill?
- Will there be sufficient funds available to the business or the estate to ensure that the business can continue running between the death of the owner and its later sale?
Additional considerations
In either case, if the full value of the business is to be utilised, consideration needs to be given to ensuring that the goodwill of the business is maintained and that someone is in a position to run the business.
In many cases consideration should perhaps also be given to whether any interest can be or should be passed on to the next generation before the death of the business owner if this would help to ensure the success of the business and the transfer of its value in a tax efficient manner.
For more information on the different scenarios that can be covered in Wills for business owners, please see our latest article here.
We recommend that all business owners prepare business Wills and regularly review and update them where necessary.
The members of our Private Client team are experienced in helping to achieve this. To ensure that the full value of the business is available to transfer to the intended beneficiaries or can be realised on sale for their benefit, we liaise with members of our Corporate and Employment teams to ensure that the business is structured in such a way as to achieve those aims. This also helps to promote job security for those employed by the business on whom its success ultimately depends.