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Protecting your business FAQ's

Protecting your business FAQ's

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 Finding out about Business Succession Planning can be a daunting prospect. Here are some quick links to help you.

 Finding out about Business Succession Planning can be a daunting prospect. Here are some quick links to help you.

Hard work and dedication have resulted in you building a successful business to benefit you and your family. Naturally, you want to ensure that your loved ones are provided for in the event of your death. 

For this reason, it is recommended you think ahead to what would happen if you or a business partners were to die and plan a financial strategy for this scenario.

Without the appropriate business succession strategies in place, the risk is that the following may occur:

  • Your spouse/partner and children may not inherit your share of your business.
  • Your surviving business partners may not be able to buy out your share.
  • The surviving spouse or children may be obliged to take over the running of the business.
  • The value of the business could depreciate, owing to the inexperience of the individual/s who take over your share.
  • The business may have to be sold, and the proceeds become liable to Inheritance Tax.

Hard work and dedication have resulted in you building a successful business to benefit you and your family. Naturally, you want to ensure that your loved ones are provided for in the event of your death. 

For this reason, it is recommended you think ahead to what would happen if you or a business partners were to die and plan a financial strategy for this scenario.

Without the appropriate business succession strategies in place, the risk is that the following may occur:

  • Your spouse/partner and children may not inherit your share of your business.
  • Your surviving business partners may not be able to buy out your share.
  • The surviving spouse or children may be obliged to take over the running of the business.
  • The value of the business could depreciate, owing to the inexperience of the individual/s who take over your share.
  • The business may have to be sold, and the proceeds become liable to Inheritance Tax.

Planning in advance ensures that both your business financial affairs and personal welfare are in safe hands, if the worst were to happen.

Planning in advance ensures that both your business financial affairs and personal welfare are in safe hands, if the worst were to happen.

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Ask us a question

Protecting your business - Frequently Asked Questions

Protecting your business - Frequently Asked Questions

We give below three suggestions of how to protect your business:

  • Ensure that you have taken out sufficient Life Cover to protect all parties' shares of the business, such as a Family Life Assurance policy.
  • Set up a Company Will 
  • Set up a Cross Option Agreement.

Proceeding with the above suggestions will ensure that the surviving business partner(s) has the right to buy out the deceased's share of the business. The Family Life Assurance Policy's proceeds could be paid to the surviving spouse or Beneficiaries in exchange for their inherited share of the company. 

Equally, the surviving spouse or beneficiaries would be able to exercise their right to sell this share of the business to the surviving business partner/s, in exchange for either the market value or an agreed amount covered by a Family Life Assurance Policy. 

We give below three suggestions of how to protect your business:

  • Ensure that you have taken out sufficient Life Cover to protect all parties' shares of the business, such as a Family Life Assurance policy.
  • Set up a Company Will 
  • Set up a Cross Option Agreement.

Proceeding with the above suggestions will ensure that the surviving business partner(s) has the right to buy out the deceased's share of the business. The Family Life Assurance Policy's proceeds could be paid to the surviving spouse or Beneficiaries in exchange for their inherited share of the company. 

Equally, the surviving spouse or beneficiaries would be able to exercise their right to sell this share of the business to the surviving business partner/s, in exchange for either the market value or an agreed amount covered by a Family Life Assurance Policy. 

Cross Option Agreement - This is an agreement in which shareholders of a private limited company enter into an agreement, where each shareholder grants options over their shares on death to the other shareholders. They also take out Life Assurance policies, which are written in trust for the other shareholder option holders.

If you or a business partner dies, their share will pass to their spouse or beneficiaries through their Will. This is now deemed to be part of their estate. Whilst this share is held by the aforementioned beneficiary, and the business continues trading, the assets will be exempt from Inheritance Tax if they qualify for Business Relief (BR). 

Once a Cross Option has been put into effect, BR is no longer available on the proceeds from any Life Assurance. 

Cross Option Agreement - This is an agreement in which shareholders of a private limited company enter into an agreement, where each shareholder grants options over their shares on death to the other shareholders. They also take out Life Assurance policies, which are written in trust for the other shareholder option holders.

If you or a business partner dies, their share will pass to their spouse or beneficiaries through their Will. This is now deemed to be part of their estate. Whilst this share is held by the aforementioned beneficiary, and the business continues trading, the assets will be exempt from Inheritance Tax if they qualify for Business Relief (BR). 

Once a Cross Option has been put into effect, BR is no longer available on the proceeds from any Life Assurance. 

With a standard Cross Option Agreement, the surviving partner now owns 100% of the company. 

This is a mutually workable solution whilst the business is still trading, and Business relief is still applicable. However, if the business is sold, the surviving business partner’s Estate will be increased to include the proceeds from the sale. 

With a standard Cross Option Agreement, the surviving partner now owns 100% of the company. 

This is a mutually workable solution whilst the business is still trading, and Business relief is still applicable. However, if the business is sold, the surviving business partner’s Estate will be increased to include the proceeds from the sale. 

For your fee free consultation on making your Will and discussing Business Succession Planning

For your fee free consultation on making your Will and discussing Business Succession Planning

PLEASE GET IN TOUCH WITH US TODAY

PLEASE GET IN TOUCH WITH US TODAY

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Inheritance 

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Protecting your business and Business Succession Planning

Call us on 020 3355 2875

Protecting your business and Business Succession Planning

Call us on 020 3355 2875

How can I plan to protect my business from the impact of my passing?

How can I plan to protect my business from the impact of my passing?

What are the benefits of setting up a Cross Option Agreement? 

What are the benefits of setting up a Cross Option Agreement? 

What are the implications of a standard Cross Option Agreement for the surviving partner/s in a business? 

What are the implications of a standard Cross Option Agreement for the surviving partner/s in a business? 

We offer Business Estate Planning tailor-made to suit you and your business. Our services takes the standard planning options available on the High Street a significant step further.

Our planning provides significant protection to the business and explores ways  of reducing the possible impact of Inheritance Tax.

When we work with you on business planning strategies, our aim is to protect your business assets from Inheritance Tax, creditor claims and long-term cost of care. 

Furthermore, the appropriate Life Cover will also be assigned to 'Shareholder Trusts' so that these proceeds do not impact the surviving individual estates.

We offer Business Estate Planning tailor-made to suit you and your business. Our services takes the standard planning options available on the High Street a significant step further.

Our planning provides significant protection to the business and explores ways  of reducing the possible impact of Inheritance Tax.

When we work with you on business planning strategies, our aim is to protect your business assets from Inheritance Tax, creditor claims and long-term cost of care. 

Furthermore, the appropriate Life Cover will also be assigned to 'Shareholder Trusts' so that these proceeds do not impact the surviving individual estates.

How do our Wills and Cross Option Agreements differ from those of our competitors?

How do our Wills and Cross Option Agreements differ from those of our competitors?

The surviving business partner/s still retains their original share of the business. The deceased's partner's share is passed directly into a Shareholder Trust, or Trusts, from where the Life Assurance proceeds were initially paid. The surviving director still has the fullest control of the business, as he is a Trustee of the Shareholder Trust(s).

The Shareholder Trust(s) can also be utilised, as an additional efficient Income Tax planning tool.

Now that a proportion of the business is in the Shareholder Trust(s), any dividends paid into the Trust(s) can be distributed to Beneficiaries of the Trusts, who may well have nil or low rate Income Tax liability.

By this process, should the surviving director(s) decide to sell the business, only their original share will enter their Estate. The remaining share will belong to the Shareholder Trust(s) for which they and their family are Beneficiaries. This share is also protected and cannot be assessed for Inheritance Tax purposes or be at risk of future compromise by divorce, cost of long-term care or bankruptcy.

The surviving business partner/s still retains their original share of the business. The deceased's partner's share is passed directly into a Shareholder Trust, or Trusts, from where the Life Assurance proceeds were initially paid. The surviving director still has the fullest control of the business, as he is a Trustee of the Shareholder Trust(s).

The Shareholder Trust(s) can also be utilised, as an additional efficient Income Tax planning tool.

Now that a proportion of the business is in the Shareholder Trust(s), any dividends paid into the Trust(s) can be distributed to Beneficiaries of the Trusts, who may well have nil or low rate Income Tax liability.

By this process, should the surviving director(s) decide to sell the business, only their original share will enter their Estate. The remaining share will belong to the Shareholder Trust(s) for which they and their family are Beneficiaries. This share is also protected and cannot be assessed for Inheritance Tax purposes or be at risk of future compromise by divorce, cost of long-term care or bankruptcy.

How does a Cross Option Agreement benefit the remaining business partner?

How does a Cross Option Agreement benefit the remaining business partner?

If there is more than one shareholder in a business, then we recommend Business Succession Planning, and would be happy to discuss this with you. 

If there is more than one shareholder in a business, then we recommend Business Succession Planning, and would be happy to discuss this with you. 

For a no-obligation conversation about setting up or reviewing your Will and Business Succession Planning, please call us 020 3355 2875

For a no-obligation conversation about setting up or reviewing your Will and Business Succession Planning, please call us 020 3355 2875

Please call us on 020 3355 2875 for a conversation about setting up a Business Succession Plan.

Please call us on 020 3355 2875 for a conversation about setting up a Business Succession Plan.

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Protecting your business

Protecting your business

At HB Partners, our consultants can advise you on all aspects of Business Succession Planning

At HB Partners, our consultants can advise you on all aspects of Business Succession Planning

Who is entitled to your share of your business if you die without making a Will which incorporates Business Succession Planning? 

Who is entitled to your share of your business if you die without making a Will which incorporates Business Succession Planning? 

Without a valid Will, your share of your business will be subject to the Laws of Intestacy, and the person who inherits it may not be the person you intended.

Have you considered whether you or your business partner/s will be content to run the business with a surviving spouse or beneficiaries?

The death of a business partner can significantly impact the running of a business. Without the correct business succession provisions in place, this could this could result in its devaluation. 

Without a valid Will, your share of your business will be subject to the Laws of Intestacy, and the person who inherits it may not be the person you intended.

Have you considered whether you or your business partner/s will be content to run the business with a surviving spouse or beneficiaries?

The death of a business partner can significantly impact the running of a business. Without the correct business succession provisions in place, this could this could result in its devaluation. 

We highly recommend that, when making your Will, you determine who will run your part of the business when you die. If, during the planning stage, it is agreed between you and your spouse that they are not the right person to do so, then Business Succession Planning becomes critical for the company’s future. 

It is important to consider the possibility that this may happen. And, given the changing personal circumstances following your passing, the surviving spouse may wish to be bought out. 

We highly recommend that, when making your Will, you determine who will run your part of the business when you die. If, during the planning stage, it is agreed between you and your spouse that they are not the right person to do so, then Business Succession Planning becomes critical for the company’s future. 

It is important to consider the possibility that this may happen. And, given the changing personal circumstances following your passing, the surviving spouse may wish to be bought out. 

How will the business be managed if a surviving spouse or a beneficiary does not wish to take over your share?

How will the business be managed if a surviving spouse or a beneficiary does not wish to take over your share?

Would you have sufficient funds to purchase the Deceased Director's share from their family? Or would the business have to be sold? 

Would you have sufficient funds to purchase the Deceased Director's share from their family? Or would the business have to be sold? 

If the deceased's beneficiaries sell their share of the business, how will this impact the Estate as their assets increase? How will it also affect the surviving business partner's assets, as these too increase? 

Both parties' Estates may be impacted by Inheritance Tax in the future, having now lost any Business Relief previously available, whilst the company was still trading. 

With the business's sale, 40% of the proceeds will be lost to tax.

If the deceased's beneficiaries sell their share of the business, how will this impact the Estate as their assets increase? How will it also affect the surviving business partner's assets, as these too increase? 

Both parties' Estates may be impacted by Inheritance Tax in the future, having now lost any Business Relief previously available, whilst the company was still trading. 

With the business's sale, 40% of the proceeds will be lost to tax.

Click below to find out more

Click below to find out more

Protecting your business

Protecting your business

What are 3 ways to protect your business?

What are 3 ways to protect your business?

Benefits of a Cross Option Agreement?

Benefits of a Cross Option Agreement?

Consequences of a Cross Option Agreement?

Consequences of a Cross Option Agreement?

How do our Wills and Agreements differ?

How do our Wills and Agreements differ?

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