When it comes to your Will, the only assets and liabilities that form part of your Estate are those that are legally 'yours' (i.e. in your name). But what if you're a small business owner?
It's no surprise that one of the most common questions we get from business owners is 'Does my Will include my business?'
And - like all legal scenarios - our answer looks a little something like this:
What happens to your business after you pass away depends on how it has been set up. We've included some of the more common business structures below and how the assets and value of the business are typically passed on.
For a sole trader operating their own business, their business assets and value can be distributed to the person's chosen beneficiaries under their Will. The business debts will also form part of their Estate, and will need to be paid out before distributing the Residuary Estate to the beneficiaries.
For partnership business structures, the legal partnership agreement will typically cover what will happen in the event of one or both of the partner's deaths. For example, some agreements include a buy/sell clause, where the surviving partner is given the first option to buy the deceased partner's share and allows the deceased partner's beneficiaries to inherit the sale proceeds. If no partnership agreement exists, State legislation will apply (the Partnership Act).
In a company structure, the passing of ownership in the event of death is generally stipulated in a shareholders' agreement. In terms of share ownership, a company director is able to leave their chosen beneficiaries any shares they have in the company under their personal Will, however they are not at liberty to pass the assets of the business onto beneficiaries, as these are owned by the company entity.
If the business assets are held in a trust, they will be passed in accordance with what is set out in the Trust Deed. Business shares are also dealt with in line with the Trust Deed.
As always, if you require personalised advice in relation to your business and Estate-planning, we recommend getting in touch with your local solicitor and/or financial expert.