It’s good business to make sure your affairs are in order in the event of the unexpected – by making a will.
But if you are a company director, shareholder, sole trader, working full time or part time, in a partnership or self-employed, have you thought about what would happen to your business in the event of your death or ill health?
Everyone with a business interest should think about making a Business Person’s Will and drawing up a Lasting Power of Attorney (LPA).
A Business Person’s Will can protect your business interests, making sure all your assets are secure for the benefit of your family.
It allows you to nominate a Business Executor who can make decisions about continuing the business or selling it as a going concern to help your family in their hour of need.
The Inland Revenue says that 82 per cent of all businesses collapse or are badly affected after the death of a key figure – making a Business Person’s Will can ensure this doesn’t happen to the business you have worked so hard to build up.
The same logic applies to making a Lasting Power of Attorney. It ensures someone is appointed by you to make decisions on your behalf if you become unable to make them for yourself.
LPAs have become more common in recent years, especially to deal with personal finances and health issues in the event of someone suffering from dementia.
But you can also make a LPA for business or commercial reasons – ensuring that someone you trust can make decisions for you to ensure your business does not fall into disarray.
If you are injured, or fall seriously ill, an LPA makes sure you have had a say in who is making strategic decisions for the good of the future of the business.
If there is no legal structure in place, there could be problems with:
- Accessing the business’s bank accounts
- Arranging contracts with suppliers
- Paying staff salaries.
You need to think about who you would trust to take on this role, and talk it through with them so that they can take over in adversity. You can appoint more than one attorney, and specify in the agreement that they act together in certain areas but separately in others.
Mike Brewer had operated his gutter cleaning business for 20 years on a self-employed basis when he fell from his ladder and was killed.
He had regular customers dating back to the start of his business, many of who paid him by standing order to clean their gutters on a regular basis. He had two other people who worked for him and his business had built up a turnover of £95,000 a year.
At the wake after his funeral, his widow was offered £50,000 for the business by a rival if it could be transferred as a going concern with the customer list and trading records complete.
But she had no control over the books which were now in the hands of her husband’s ex co-workers and she had no legal rights as a Business Executor to act for the company and gain access to all the paperwork.
This meant she had no rights over “intellectual property” and could do nothing to stop the other two carrying on the business.
She sold her husband’s van, ladders, buckets and equipment for £5,000.
If Mike had taken an hour and a few pounds to draw up a Business Person’s Will, she would have been able to sell the business for £50,000, not £5,000!