You need a will but so does your business

As individuals, many of us have considered financial and succession planning at some point. Making a personal will is a common step taken to outline what happens to our estate upon death. 

Many entrepreneurs, who have invested substantial time, effort and resources into building their businesses, would not hesitate to take out insurance to safeguard against unforeseen circumstances. However, often an essential aspect of planning is overlooked: creating a business will. 

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Many business owners will assume their personal will is enough to cover their business assets, but this may not be the case. A business will, while less commonly considered than a personal will, is essential for safeguarding the future of your company and ensuring that the hard work you have invested is not undone. 

Why Your Business Needs a Will?

A business will outlines your wishes for your company in the event of your death or incapacity, such as serious illness. It serves as a guide for what should happen next, including:

• Who will take over or manage the business.
• How key decisions should be made.
• Any specific outcomes you would like to see for the company, its employees, or its future direction.

This should provide you with peace of mind for ensuring that the transition is as seamless as possible for everyone involved.
 

When Business Wills are Essential? 

Whether you are an owner, partner, sole trader or director, it is critical to protect the future of your business. The specific implications will vary depending on your role within the business, but in all cases a business will is a vital tool for protecting your wishes and the business itself. Without this, some implications include: 

• For Small Business Owners: Families often rely on the business as the primary source of income. Having a business will can ensure that your hard work continues to benefit them. 
• For Majority Shareholders: Without a business will, shares may pass to family members unfamiliar with company operations or become inaccessible in inflexible trusts for minor children.
• For Sole Directors: The death of a sole director can lead to frozen business accounts, disrupting cash flow and contracts.
• For Sole Traders: While businesses may cease upon their death, proper planning can guide loved ones in selling assets, ensuring maximum value.

Benefits of Creating Business Wills?

There are number of key reasons why every business owner should consider putting a business will in place:

1. Safeguarding Financial Health - Without a business will, financial uncertainty can arise. Creditors, shareholders, and family members may face challenges if there is no clear plan for the business’s continuity. This may result in the company ceasing trading after the death of an owner or losing value. A business will can ensure that your intentions are clear, protecting the company’s financial stability. This can help to avoid confusion and disputes.
2. Ensuring Smooth Transitions - In some scenarios, the company may cease trading after the death of an owner or pass ownership on in a different way than you would have wished. Whether it’s appointing a successor, identifying interim management, or clarifying operational procedures, a business will can help facilitate a smooth transition. The goal here is that instructions within the will provide direction to minimise disruption, reduce stress for employees and stakeholders, and ensure that operations can continue without unnecessary delays. It may also help to prevent legal disputes among family or business partners in the event of your passing or incapacity.
3. Preserving Business Legacy - Your business represents years of hard work and dedication. A well-crafted business will can protect this legacy, ensuring that your vision for the company is honoured and that its values and direction remain intact.

Setting up a Business Will

The structure and content of a business will can vary significantly depending on your specific interests and role in the business. Whether you are a sole trader, a director, partner, or a shareholder will influence what the will should include. These variations arise due to the legal complexities and broader financial planning considerations that come into play. 
Drafting a business will is not just about succession, it also requires a comprehensive review of your business and personal circumstances. Additionally, industry-specific regulations and business structure requirements must also be carefully considered, as these can add further layers of complexity. 

Expert Guidance

Drafting a business will is a vital step in securing the future of your company, but it can be a complex process that benefits from expert input. Legal and financial professionals can help ensure your business will is tailored to your business’s specific needs, addressing areas such as succession planning, tax efficiency, and regulatory compliance.

At the Private Office, we work closely with business owners to simplify this process. By providing key financial insights, and working alongside solicitors, we can help you create a business will that aligns with your goals and protects your legacy.

If you would like to begin this conversation, please don’t hesitate to reach out. We can arrange a complimentary, no-obligation meeting with one of our advisers to discuss safeguarding your future and the legacy of your business.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate wills or trusts.