What is a company will?
A company will, also known as a business will, is a legal document that outlines what happens to a business in the event of the death of a business owner or partner. The purpose of a company will is to provide a framework for the transfer of ownership and management of the business in the event of the owner’s or partner’s death.
A company will typically includes provisions for the appointment of a successor to take over management of the business, the transfer of ownership to surviving partners or family members, the sale of the business, and the distribution of assets. It may also include provisions for the continuation of key contracts and agreements that are essential to the operation of the business.
Company wills are particularly important for small businesses or partnerships, where the death of a key partner or owner could have a significant impact on the future of the business. By creating a company will, business owners can ensure that their wishes are carried out and that the business continues to operate smoothly in the event of their death.
Creating a company will should be done in consultation with an experienced business advisor. They can help business owners understand their options and create a plan that meets their unique needs and objectives.
Business owners should also review their company will and shareholder’s agreement regularly and make updates as needed to ensure that it reflects any changes in their circumstances or wishes.
In addition, it is important for business owners to communicate their company will to key stakeholders and employees to ensure a smooth transition in the event of their unexpected absence or death. This can help avoid confusion and uncertainty during a difficult time and maintain the stability of the business.
What are the key provisions that may be included in a company will?
A company will is a legal document that outlines what happens to a business in the event of the death of a business owner or partner. The death of a business owner or partner can potentially have a major impact on the continuation of a company, particularly if there is no clear plan in place for how the business will be managed and the assets will be distributed.
A company will can provide a framework for the transfer of ownership and management of the business in the event of death. It can also help ensure that the business continues to operate smoothly and that the interests of all stakeholders are protected.
Some key provisions that may be included in a company will include:
- Appointment of a successor: The company will can designate a successor to take over management of the business in the event of the owner’s or partner’s death. This can help ensure a smooth transition and continuity of operations.
- Cross-Option agreements: A Cross-Option agreement can be included in the company will to ultimately provide for the tax-efficient sale of a deceased partner’s share of the business to the remaining partners or to the company itself. This can help ensure that the business remains viable and that the deceased partner’s family is provided for.
- Distribution of assets: The company will can specify how the assets of the business will be distributed in the event of the owner’s or partner’s death. This can help prevent disputes and ensure that all stakeholders are treated fairly.
- Continuation of key contracts and agreements: The company will can provide for the continuation of key contracts and agreements that are essential to the operation of the business, such as leases or supplier contracts.
Why do I need both a business succession plan and a company will?
A business succession plan and a company will serve different purposes, and both are important for ensuring the smooth transfer of your business interests in the event of your death or incapacity.
A business succession plan is a comprehensive plan for the transfer of your business interests to your chosen successor(s) in the event of your retirement, death, or incapacity. It typically includes a detailed plan for the management of the business during the transition period, as well as provisions for the transfer of ownership and management responsibilities to your chosen successor(s). A business succession plan can help ensure that your business continues to operate smoothly and that your business interests are transferred according to your wishes.
A company will, on the other hand, is a legal document that sets out your wishes for the distribution of your shares in the company in the event of your death. It can also include provisions for the appointment of new directors and the management of the company following your death. A company will is particularly important if you own a significant portion of the company’s shares or if you are the sole shareholder, as it can help ensure that your shares are distributed according to your wishes and that the management of the company is not disrupted.
Contact your usual Beavis Morgan partner or email info@beavismorgan.com for expert advice and support. Our dedicated BM Estate Planning team offers comprehensive assistance on various inheritance matters and later life planning. Whether you need assistance with basic wills or intricate inheritance tax planning, we can guide you through the process and provide expert advice on all your estate planning needs.