Would your Business survive if you passed away or became critically ill?
Business succession planning should be a priority for every business. Succession planning is quite simply the process of planning for what you want to happen if you, or a business partner, resigns, falls seriously ill or even passes away.
So what happens to a business if its owner, co-owner or a partner passes away or falls seriously ill?
Much will depend on the type of business – sole trader, partnership or limited company – but unless there has been some advance planning, the chances are that there will be disruption, arguments and the strong possibility that all or part of the business will end up in the wrong hands.
If you are a business owner, business succession planning and insurance is important to ensure that any disruption to the business is minimised, after all you’ve worked so hard to build your business.
Here’s some questions for you to think about.
Whether your business is a sole tradership, limited company, partnership or limited liability partnership (LLP) the following sample questions are equally relevant in uncovering your succession planning needs:
- Do you have a Business Will? – this is a formal agreement that details what should happen to your share of the business and your liabilities if you pass away
- Do you have an exit strategy?
- Do you know the value of the business?
- What would you like to happen to your share of the business if you die or become critically ill?
- Do you want your beneficiaries to receive the value of your share of the business?
- What do the Articles of Association or Partnership Agreement say will happen?
- Will your fellow shareholders/partners/members want your beneficiaries or a competitor to join the business?
- Could the remaining shareholders/partners/members afford to buy your share of the business?
- Is there a shareholder/partnership agreement in place? If so, do you know if it’s inheritance tax (IHT) effective?
Business owners seeking a smooth and equitable transition of their interests should seek a competent, experienced advisor to assist them in this matter.
The Need for a Written Agreement
When planning for succession, a written agreement is recommended. Without a written agreement, the competing interests of the business and family members, could lead to major conflicts and potentially the forced liquidation of the business.
The written agreement can take several forms and the correct method will depend upon the type of business and specific requirements. But a written agreement is critical in ensuring the stability of your business for your clients, employees and investors (or creditors).
It is so much more than simply writing your Will
Business succession planning involves legal, tax and personal financial issues and can be complicated and daunting, therefore it is important that you seek professional advice.
A combination of legal documents may be relevant, including a business Lasting Power of Attorney (LPA) through which you authorise a chosen person (an attorney) to make certain decisions on your behalf.
Whatever the legal documentation requirements, it is important that they align with your financial, tax and business goals and objectives. Guidance from a qualified professional is strongly recommended.
Still unsure about your business succession planning?
If you are putting off your business succession planning because you are unsure of how to go about it or can’t decide on the fine detail, then there is no need to worry.
Business succession planning is complicated and can seem very daunting, however to provide you with the peace of mind, you can discuss your situation and concerns with Natalie from Trusted Law Ltd.
It is a process that can be dealt with relatively quickly, and it can save you hours of stress trying to figure out what is needed.
To make your appointment, or for an informal chat, please feel free to contact me via email: info@trustedlaw.co.uk or phone: 01953 711 950 / 07972 212 355.
Please note that this information is provided as a guide only and in accordance with the current laws as at the date of publishing.
About me and Trusted Wills & Probate Ltd
My name is Natalie Chapman – company director of Trusted Wills & Probate Ltd, a wife to Darren and a Mum to our twins. To read more about how Trusted Wills & Probate Ltd was establish please click here.
I have personally visited each of my clients and enjoyed my time getting to know each of them, listening to their tales and stories and making sure I fully understand their needs. If you would like to discover what my clients say about us, please feel free to read my client Testimonials.