When running a business on a day to day basis, the primary focus is working towards the goals set for the year. Whilst business owners offer their services or products to others, they tend to neglect their own personal affairs.
With many SME owners being key to the success of their business, succession planning is essential if you want to avoid any unintended consequences should you become seriously ill or die.
The most important considerations for your own affairs are making a Will and a making a Power of Attorney. The only way to ensure your business & personal affairs are in order is to plan ahead.
Make a Will
You should consult a specialist Private Client Solicitor with regards to making a Will. As part of this process, a full review of your Inheritance tax position should also be undertaken.
The assumption that your estate will pass to your spouse, civil partner or children who can then sort out any business interests is leaving matters out with your control and has the potential to cause problems for both your family and your business. Whether you own business assets personally, through a company shareholding, or partnership, this needs to be taken into consideration to ensure that your interest is passing in the most tax efficient way.
It is important to consider who you wish to inherit your business interest. It may be appropriate for it to pass to one or more family members or business partners, but the use of a Trust could be more sensible. This process involves a review which takes into account your personal circumstances as well as any provisions in a partnership agreement, or articles of association, which may affect your interest in the business on death. A professionally drafted Will ensures that it passes to who you wish.
You also need to ensure that in the event of an untimely death, the business is not disrupted and there is a planned route to ensure that the business can continue. A Will is essential to provide certainty for all parties involved.
Make a Power of Attorney
The second step is to ask your Solicitor to prepare you a Power of Attorney.
By making a Power of Attorney you are stating who will be your Attorney (or Attorneys) should you require assistance with running your finances, or if you become very ill, who will make decisions about your welfare. You can only make a Power of Attorney while you retain the capacity to understand the effects of one. Often individuals leave it too late to make a Power of Attorney and become very ill. A family member then has to apply to the Court for a Guardianship Order, a costly and burdensome process.
Within the Financial Powers, provisions can be included which relate specifically to your business. This is helpful where you wish to appoint a spouse, civil partner or child for your personal financial powers, but a business partner for the specific business powers.
Whilst the continued success of your business will be your focus this year, make sure that you don’t neglect getting your personal affairs in order.
Megan Maclean is an Associate in our Private Client Department. If you have any questions about making a Will, Power of Attorney or IHT Planning, please contact Megan on 03330 430150 or email firstname.lastname@example.org