When Business Gets Personal
Juggling business and family commitments is never easy, nor is finding the time to plan for the future. Planning for death can seem somewhat bleak and a task that most of us put at the end of our ‘To Do’ list. However, have you thought about ensuring the ongoing success of your business after your death? Would you wish to prevent family friction and avoid unnecessary tax bills in the event of your untimely demise? If so, it is vital that you engage in some personal planning sooner rather than later.
Why is personal estate planning so necessary to business needs?
It is important that your personal planning works in harmony with provisions made in company documents.
Reviewing the company articles of association and any shareholder agreement in conjunction with reviewing your Will, helps to ensure that the business is not unduly disrupted on your death.
Making sure your Will works in conjunction with shareholder provisions and company articles can provide business benefits such as:
· Protecting the future running of the business
· Ensuring that you or the other business owners are in a position to buy out the interest of a deceased shareholder
· Securing the value of the shareholder’s interest in the company
However, providing financial security for your family as well as ensuring the continuity of the business is likely to be equally important to you.
How does appropriate business planning benefit my family in the event of my death?
· Providing a clear avenue for your interest in the business to be purchased on death, allows your family to be provided for from the sale proceeds in a timely manner.
· Valuable Business Property Relief from Inheritance Tax can potentially apply to your business assets. The importance of having an appropriately drafted Will to ring-fence these assets so that the relief is properly captured, cannot be over-emphasised.
· It allows you as a business owner to direct who should take over the running of the business, as well as who should benefit from its value
Your priority may be to ensure a family member or particular person should inherit shares and/or have a say in the running of the business.
Alternatively, it may be essential to you that surviving shareholders are able to purchase shares to prevent other owner’s family becoming involved.
Either way, the legal documentation must clearly state what is to happen and give a practical mechanism to enable shares to be purchased if appropriate. The use of insurance and cross-option agreements may facilitate this.
As, these are complex issues that often require a clear and joined-up approach between lawyers, accountants and financial advisers, it is important that these persons are closely connected to you and your business. Should you require any assistance with understanding these issues further, or personal planning, then please get in touch with our Private Client team, who would be happy to assist.