What exactly is a “Business Will”?
Anyone that is in business can write a Will that covers their business. The business can be in the form of a sole trader, a partnership or limited liability partnership (LLP), or a limited company.
In that Will, you don’t even need to mention the business if your intention is that it will form part of your estate and be distributed to your chosen residuary beneficiaries.
By contrast, you may want any business or shares in a business to be dealt with differently. In order to secure Business Relief against Inheritance Tax (formerly called Business Property Relief) you may want a trust to be set up by your Will on your demise, once again for your chosen beneficaries.
Is a Will enough, and does it constitute a “Business Will”?
Willing your beneficaries a business could be willing them a “poison chalice”. It could be that you have given no guidance as to how to run the business, or sell the business. So part of your “Business Will” should be to think about writing some notes and effectively work through the challenges that will occur on Day One after your demise. Those notes could be kept with your Will, or in a place where that can be accessed by the right people quickly. Take care not to write down any passwords that could release data or monies into the wrong hands.
Minority shares in a limited company may be worthless, or a pile of trouble for the owner of the shares. As part of your “Business Will” you should think about getting in place a cross option agreement maybe as part of a wider Director’s Agreement to protect the value fo your shareholding . This allows the surviving shareholders the option of buying your shares at an agreed figure (or an agreed formula) on your demise. These amounts can be covered by life cover in a company that will pay out allowing your beneficiaries to walk away with cash rather that shares.
The same principle applies to partnerships or LLPs except the agreement is a Partnership Agreement with a cross option included.
So in summary, a “Business Will” is more than a Will. It is a series of planning steps that you can take that means that your beneficiaries will benefit from your hard work rather than leaving them a complex puzzle that they would prefer not to deal with at the time of a bereavement.