What would happen to your business if you were to die?

What would happen to your business if you were to die?

No one wants to think about their own mortality but if you don’t then those you care for may suffer.

Making a Will is important anyway but if you have an interest in a business it’s even more important. Since, in addition to your family’s interests you may have fellow investors or partners interests to consider as well. In the extreme case your fellow shareholders could find your spouse or partner as a shareholder contributing nothing at all to the running or development of the business.

What happens to your business on your death depends on its legal structure:

  1. If you are a sole trader you can gift the business in your Will to whomsoever you wish, it could be to a son or daughter or someone else already working in the business.
  1. If you are in a partnership with others (and there is no partnership agreement in place) the law says that the partnership is dissolved on the death of one of the partners. The liability for your share of any debts and obligations of the partnership will pass to your estate.
  1. If you are a shareholder in a limited company (and there is no shareholder agreement in place) then subject to the Article of Association on your death your shares in the company will pass i) in accordance with your Will if you have left one; or otherwise

i)   in accordance with your Will if you have left one; or otherwise

ii)  in accordance with the rules of intestacy.

In the third case it is essential that the company puts a shareholder’s agreement and insurance in place. This will ensure that shares can be bought back and that the business can continue after the death of a shareholder.

Contact us for more information.

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