By Joseph McCullough, Solicitor, Commercial Conveyancing
Whether you are a shareholder in a limited company, a partner in a partnership, or a sole trader, it is vital that you ask yourself the question: what will happen to my business when I die?
Without any protection in place, if a key member of the business dies, or becomes incapacitated, then the business could be crippled either financially, or just in the day to day running of the business, while the legal implications of the loss are dealt with.
There are a few simple provisions that can be put in place now to protect your business and to also make things easier for your business partners, and loved ones, should the worst happen.
Partnership or Shareholders Agreement & Cross Option Agreements
Whether you run a partnership or a limited company, a simple agreement can set out what would happen should one of the partners or shareholders die or become incapacitated. More often than not this involves a cross option agreement so that the other partners/shareholders can buy back the incapacitated member’s share in the business. This option can tie in with any life insurance policy that the business may have organised for its members so that the surviving partners/shareholders have enough money to purchase the shares from the surviving relatives.
Make a Will or Lasting Power of Attorney
If you are a sole trader then it’s imperative that you have a will in place that effectively deals with your business assets on your death, whether this is to minimise tax liability or to secure the future of your business.
A lasting power of attorney can make sure that someone is appointed as attorney to look after your business should you become mentally incapacitated.
If you are interested in protecting your business then please don’t hesitate to get in touch for a no obligation chat about your business legal needs.
Disclaimer: The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice, and the law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice on their own particular circumstances.