There’s a lot to think about when you start a business. Including your business in your will might not be at the top of your list, but it’s a vital consideration. Understanding how your business interacts with your will can even help you create the right documents from the outset. Whether you’ve yet to make your will or need to review an existing one, here’s how starting a business can change your will.

Your business structure

Your business structure affects what will happen after you die. If you’re a sole trader, you have a simple business structure, and your business will likely wind up when you’re gone. If you have a limited company, it’s a separate legal entity and can continue without you.  The type of business and whether you have any employees may dictate if it can continue after your death, so your will should make provision for that.

If you’ve already got a will and are already in business, go back and check whether your executors have the authority to deal with your company. Your company documents will determine what they can do, and we’ll talk about that shortly. If you don’t have a will yet, you can work with a will writer to create one that includes your business.

Making provisions for clients and staff

If your business is going to wind up when you’re gone, you should still consider what will happen to your clients. You might want to signpost them to someone else offering the same service, so they aren’t left in the lurch. If you’re in a regulated profession, your regulatory body may require you to have a named person to contact if you die. We have an agreement with another firm, but our professional body would also sort things out if necessary.

If you have employees, you should also consider what will happen to them if the business were to close. A will writer can include specific clauses in your will which allow your executors to own and manage the business during a transition period.

Appointing executors

Your executors carry out the provisions in your will, including your personal and business assets, so think about who you should appoint to deal with your business interests.

You can have a separate business executor if you need someone with business experience or specific expertise. It’s a good idea to include a letter of wishes with information on who your executors can contact. This could include your accountant and legal adviser.

Limited company documents

If you have a limited company with more than one shareholder, your will must match your company documents. Your documents, including articles of association, shareholder agreement and partnership or LLP agreement, can override the provisions in your will if there’s a mismatch.

Your company articles could allow shareholders to override bequests if you’ve left shares to someone else. It can also affect the ongoing running of your business if you don’t have the proper documents in place.

Creating the right company documents

We’ve encountered a few family businesses that don’t have a written partnership agreement. Depending on your circumstances, an unwritten partnership can mean your business automatically winds up if someone in the partnership dies. If that happens, you’ll have to do finalised accounts up to the date of death and then start the partnership again the following day with the remaining partners.  This is traumatic all round and can be avoided by having a partnership agreement in place.

Limited companies don’t have to, but they can have shareholder agreements in place.  This is a document over and above the minimum articles of association and memorandum of association.  It covers in detail what happens in various circumstances, including how to value the business if a sale is agreed, what happens if a shareholder dies or retires, and what happens if there is a falling out between the shareholders.

These documents are bespoke to your business.   Putting these documents in place costs money, but it will always save money in the long run, as long as they’re drafted correctly. The comparative cost between getting a proper shareholder agreement or partnership is a few thousand pounds compared to tens of thousands to sort out a mess.

If you need to make a will or review your existing one to include your business, we can help. Get in touch using the form below or call us on 0116 380 0752.