Many businesses start as an idea, some of them going back generations to an individual who had the foresight and courage to go it alone, or in partnership with a friend or colleague. If the venture is successful, then a partnership or limited company is established. With the excitement and total dedication to the present tasks in hand, succession is often overlooked. Who will take your place as managing partner or director? Making a will helps to smooth the process but needs careful thought and planning on your part to prevent minimum disruption to the business and avoiding distress to the surviving partners or directors.
If you don’t address this, your share of the business (shares in a Ltd. company or partnership, the effect is the same) forms part of your estate on death and will pass as assets to your family. Your business partners or fellow directors may find themselves in business with your surviving spouse or children! If you are the managing partner then this will affect the smooth running of the partnership business. If the surviving partners are bound to buy the shares as part of a legal agreement, they must find the money to compensate your legal heirs.
For a Limited company, business can carry on, but the shares of the deceased director is then transferable to heirs who may have no interest in running the company. There may be a legal agreement in place or the Articles of Association may provide who can own the shares. If not, then this will open the door to competitors buying the shares from the estate and influencing the direction and nature of the business, or even forcing closure. This is probably the very worst outcome.
Proper legacy planning can avoid the above. You can appoint special executors to take care of the business in your will. A specific bequest in a will can also include your fellow partners or directors. Another tool of legacy planning is insurance. Fixed overheads of the business will need to be paid as before and your fellow partners or directors will face financial strain. This gives the surviving business partners enough cash to buy the shares and have some working capital to compensate for your absence.
Making & planning your legacy through a will is important from the beginning but is also probably the last thing on your mind at start up. However, even if your business is running at full speed now, it is still not too late to plan your succession.
We at HERITANCE WILLS consider it a privilege to assist you to deal with your
business obligations when you are not there to do so.
How to appoint a Business Executor for your business in your will?
How to create wills or other legal instruments for your business legacy
Take the first step towards your peace of mind.