Planning for an unexpected death of a business owner is a sobering affair and may not be at the top of the list of priorities. However, putting in place some sensible arrangements could make things run more smoothly when family and business colleagues will be focused on grieving rather than sorting out some emergency measures to keep the business going.
Many business owners spend a lot of time and energy building up their business during their lifetime, will be proud of what they have achieved and enjoy seeing it grow. It may mean taking on more staff or developing a management team or possibly restructuring the business to make the best of its resources. Business owners are often advised to make their succession plans and consider when and how they want to pass the business on, or perhaps sell it as they get older and want to free up more time for other things.
- Make sure your Will is up-to-date, ensures you have appointed the right executors to manage your estate and gives those executors the power to carry on running the business whilst things are being sorted out.
- You may need some keyman insurance to provide some flexibility so that your business can be passed on to those you nominate.
- You should prepare a plan with your other business owners which can be followed at short notice in the event of unexpected death. This should aim to keep the business running smoothly whilst the longer-term arrangements are made. Keep this under review.
- If you are a sole proprietor you should still put together a plan to allow your family or your executors to know who to notify and what to do. This could help if there are unpaid debts due from the business or outstanding orders which need to be managed.
- Talk to your co-directors or business partners if you are one of a number of business owners and co-ordinate your plans. If one of them were to unexpectedly die, would you know how this will affect your own interest in the business? Would you need to raise funds to buy out their share and determine a price if the beneficiary will sell? You can put in place a shareholders’ agreement which sets out what should be done.
- Take the opportunity to consider your inheritance tax position and whether your interest in the business can allow a claim for business property relief to be made.