Understandably, there’s few things we’re more squeamish about discussing than our own demise. But whilst we’d rather not spend too much time dwelling on our own mortality, it’s more than a little foolish to make no provisions for the future and, whilst we’ve generally grasped this in our personal lives, it is something that tends to get overlooked when people are thinking about the long-term trajectory of their company.
The very nature of running your own business can often mean you’re focused more on the day-to-day than pondering the ephemerality of your existence. “Generally people don’t think about it,” explains Rob Martins, wills specialist at provider of accounting, tax and business services Cheesmans Accountants. An entrepreneur’s thoughts are more likely to tend toward the practical than the philosophical. “It’s all business-focused – it’s all about how they can grow, make money, expand the business,” Martins comments. “I’ve met some very successful people who’ve done a lot of good for their businesses because they’ve purely focused on it but, for want of a better phrase, they can sometimes be a bit blinkered by it.”
The extent to which not having made firm preparations can affect an organisation might not be immediately appreciable. After all, intestacy law means an individual’s estate is most likely to pass first to their spouse or civil partner and, if not, then divided equally amongst their children. In all likelihood, this will almost certainly closely mirror the deceased’s wishes and it would be tempting to think things are tied up in a neat little bow. Unfortunately, this isn’t the case.
“People might say that under the intestacy rules their estate is going exactly where they want it to go,” says Martins. “That’s all well and good but if you’ve not appointed an executor it’s going to take much longer to administer that estate.”
Whilst this might be tricky for surviving relatives, it can be utterly disastrous for an enterprise. Cheesmans has handled cases where – even with sufficient provisions being made in a will – obtaining probate and administering the estate has taken as long as a year. “If there is a business in the background, it can’t wait for a year for that whole process to go through,” Martins comments. Obviously this means it’s smart not to leave any snags that can slow the process even further.
Clearly then, making preparations for a stakeholder falling ill or passing away can minimise a lot of the headache and heartache for those left behind. First of all, the functional running of the enterprise needs to be considered. As Martins asks, “In a limited company with two 50 / 50 shareholders, what are you going to do if one of you becomes very ill or passes away?”
One of the first protections required would be key person insurance, to cover the financial costs accrued by the incapacity or death of a vital member of an enterprise. “If somebody becomes really ill, you obviously will need somebody to come in and take on their work,” explains Martins. “It’s very rare that one person will be able to carry on and cover everything.” This will help, in part, address some of the issues brought up by unexpected illness, impairment or loss of life.
But, inevitably, as with the rest of your estate, perhaps the most significant part of crafting a will for your business is deciding who will inherit your stake if you pass away. Controversial though it may sound, Martins recommends you don’t necessarily rush into leaving things to your next of kin. “You then find yourself in that position where the deceased’s siblings or wife is now a shareholder of the company but chances are they’re not going to be aware of the company’s ins and outs,” he says. More importantly, there’s probably little a grieving family member needs less than finding themselves as de facto head of an enterprise. “They’re probably not going to be in any state to assist with the running of the business.”
It’s important to remember that in handing over shares in your enterprise, you aren’t necessarily just making provisions for your family’s future: you are also giving them an obligation to actively involve themselves in the running of a potentially sizeable business. For this reason, it’s worth discussing with your potential heir(s) and, if this isn’t a responsibility they’ll want to take on, putting in something imitating pre-emption rights to allow other stakeholders to have first refusal on those shares.
“There needs to be some mechanism in there to allow the company or the shareholder who remains to have the option to purchase those shares,” says Martins. “This method preserves serving of the business, whilst the deceased person’s estate gets the money for the shares and they can distribute that accordingly.”
Given managing what happens to a business and managing the legacy of a wider estate are certainly interdependent, one might presume they’d be functions of the same set of decisions and the same will-drafting process. However, Martins feels this isn’t necessarily the case. “They are interlinked but I would look at them as two separate variables or matters to consider,” he remarks. Often looking at the legacy of one might encourage an entrepreneur to reflect on that of the other but it is worth considering the needs of your next of kin and the needs of your business in rather separate light. Martins continues, “I always find it a lot easier with clients to say it should be business one side, personal the other.”
There’s a perception this process is, by necessity, a rather complicated one and for this reason entrepreneurs may feel like their only choice is to seek the help of a solicitor. But this isn’t necessarily true for owners of micro-businesses that might have comparatively few assets. “On the wills side, you can buy home will kits and I think if you’ve got a small estate, you can probably do that yourself,” comments Martins. “However, professional advice needs to be sought when you’ve got a big estate over the £325,000 nil-rate band limit.”
Obviously, having succession plans in place for your business isn’t just about preparing for planned departures. The benefit of including your enterprise in your will is that you know your business, not just your family, are in safe hands. 
