Planning for the future is an essential part of taking care of your business. As well as making sure your loved ones are provided for, business and estate planning can ensure that your estate legitimately minimises its liability for Inheritance Tax.
If you own a business, you will want to make sure that it is left to your beneficiaries in a way that lets them benefit from it but also protects the business for the future.
Business succession can be a difficult topic for families. Some members may want to be involved with the business, while others may not, and those who do want involvement may not necessarily agree on the best direction for the business.
It is crucial to try and address problems as early as possible so that when the time comes, disputes can be avoided.
Setting up a business trust in your Will
If you specify in your Will that your business should be put into a trust, you can request that dividends, payments or shares are given to your beneficiaries so that they receive an income from the business.
You will need to select business trustees to administer the trust. They will be responsible for making the payments and dividends to the beneficiaries.
You can leave them a letter of wishes with your guidance about how you would like the income distributed.
You will also need to appoint someone to manage the business.
If you are leaving shares to family members, you will need a robust shareholders’ agreement that specifies what rights they have. You do not have to give them voting rights, they could have the right to dividend income only.
Different family members could have different types of shares. For example, someone who is working in the business could be given voting rights, while those who are not could have shares with no votes attached.
Protecting the business
If a business is not put into a trust, then there is a risk that it could end up being sold and the money used in a way that you would not want. By way of example, if it was passed directly to your children and one of them went through a divorce, their share of the business could be divided in their financial settlement, with their ex-spouse taking a share.
Putting a business into a trust can protect it from a sizeable Inheritance Tax bill that might otherwise require it to be sold or broken up. Business relief could mean a reduction of 50 or 100 per cent in the amount payable.
Help with planning
Planning for the future of your business so that it adequately provides for your loved ones and so that it is also protected requires expert help to ensure that the right trust and business documentation is put in place.
We can discuss your situation with you and make sure that you make the right preparations for your situation.
If you would like to speak to one of our expert business and trusts lawyers, ring us on 0345 2413100 or email us at firstname.lastname@example.org.