If something unexpected happened to one of the key people involved in running your business, what would happen?
Every business should have a crisis plan in place to make sure it can operate without key individuals if necessary. This should amount to a review of not only the structure of the business, but also the personal affairs of those involved.
In family businesses in particular, it is not uncommon for the founding members to remain involved in the running of the business into their later years. Something that is rarely considered is the potential for a lack of capacity or even unexpected death of key individuals.
Most people assume that their partners could manage without them or that their family could take their place. However, this may not necessarily be the case: business accounts may be frozen, leaving your partners unable to operate the simple everyday tasks of paying bills and salaries. It may be months before the account can be accessed, by which time it is possible that the business will have suffered irreparable damage.
Therefore, it is vital that all business people put in place lasting powers of attorney for their business interests and select sensible and competent attorneys to take the reins. In fact, in some industries a business partner who fails to put such provision in place may be non-compliant with their professional regulations.
It is also important to make sure that the provisions of your will are sensible and suitable to the needs of both the business and your family.
The correct combination of cross-option agreements and insurance policies can offer business partners the comfort of retaining control of the business following the death of a partner, whilst also ensuring that the cash benefit of that interest ends up in the hands of the bereaved family.
These documents need to be drafted carefully to ensure that any available inheritance tax relief is not inadvertently lost in the process.
Article written and contributed by Willans LLP
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. It is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered above, please speak to Willans LLP directly
Published on 12th November 2019
(Last updated 13th November 2019)