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Your Will and Your Business Assets |
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 Michael Overend Many people in business are aware they need to make wills to preserve the value of their business or investment for their families. Many, however, have not taken the first steps towards doing this, or even held a conversation with their families and business partners about what may happen when they die!
Michael Overend, a solicitor with Charles Lucas & Marshall’s family business team outlines some of the basic issues.
Constitution
If you carry on business through a private limited company, its constitution will be its memorandum and articles of association. These can either be in a relatively standard form, or tailored to meet specific needs.
In addition, a private company may also be subject to a shareholder's agreement (which may either be in writing or made verbally). This is an agreement between the shareholders in a company as to how that company is to be run. It may also contain terms relating to the transfer and valuation of shares and loans, which may be relevant on your death.
If you carry on business through a partnership, you need to know what your partnership agreement provides about your death. You may have decided to record the terms of your partnership by way of a written agreement, but it is also possible for a partnership agreement to have been made verbally, with the terms not reduced to writing.
Clearly as a pre-cursor to considering your business assets and your will, you need to be certain whether or not a partnership agreement or shareholders’ agreement exists, and what the terms of such agreement are. If this agreement is not in writing, then you should consider formalising them, so that your executors, beneficiaries, and business partners know where they stand.
Common Factors
Most partnership agreements and shareholders’ agreements will contain buy-out arrangements. In other words, there will be an agreed set of circumstances (which can include your death) in which the other partners/shareholders will have the right to buy-out your interest in the business, upon specified terms.
In some cases, the business uses funds which are provided by the business proprietors, either by way of loans, or guarantees. There needs to be a clear understanding of how these loans/guarantees will be dealt with following death, and how this may affect the business and your estate upon your death.
In other cases, some businesses trade without a formal lease, from premises owned by one or more of the business proprietors. The death of the property owner, where there is no formal lease, can lead to uncertainty, and can affect the valuation of both the property and the business.
Tax
Finally, you should consider the ways in which you can make your will as tax-efficient as possible. Your business assets, or assets used by your business, give you an excellent opportunity of doing this - opportunities should not be lost.
For more information contact Michael Overend on 01488 682506 or michael.overend@clmlaw.co.uk
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