The three degrees
Don’t forget that events in your personal life can dramatically affect your business, three LCF experts can help you unravel the complexities.
C athy Cook, Ann Christian and Ann Hallmark, solicitors with Yorkshire law firm, LCF Law, know the impact events in business owners’ personal lives can have on their business:
If you own a business, having a Will is essential. It allows you to choose those who will inherit your assets; minimise inheritance tax and ensure your business is dealt with properly.
Setting up a trust in your Will ensures your wishes are followed after your death. You may not want your family to inherit until a certain age, or perhaps not even until they have shown enough maturity to run the business!
If you co-own a limited company, you should consider what you actually want your family to receive – your shares, or cash following their sale to your fellow business owners. This needs careful planning and discussion to ensure everyone is happy.
If the business is a `trading’ as opposed to an `investment’ business, it may well be exempt from inheritance tax.
We can help you ensure that this tax relief is not lost if your family want to sell the business after your death.
If you are approaching retirement, it’s important to take proper advice well in advance. A business worth £500,000 could pass to your family inheritance tax free, but £500,000 cash could result in a tax bill of £200,000!
Whatever the size of your business, it is also essential to consider the potential impact upon it if you, or one of your fellow business owners, divorces. The court can make a number of orders in relation to the business, including an order for sale, although it will consider the interests of third parties.
If you, or anyone you know, owns a business, or is considering setting one up, if you are married or planning to marry, it makes sound business and financial sense to seek advice and plan ahead, not only regarding the business structure, but in considering personal wealth protection measures. Consider too practical issues such as ensuring you keep business and personal matters separate.
In relation to the business structure where there are more than one person having a share in the business you should have a Shareholders Agreement in place if a limited company or a written documented partnership agreement if a partnership. These documents can set out what may happen to the ownership in the event of death or divorce of one of the business owners.
Be smart and get it documented.