Securing Your Business Legacy: A Guide to Estate Planning for Entrepreneurs

Estate planning is often overlooked by business owners who are primarily focused on growing their ventures. However, as one progresses in age, planning for what happens to the business after you’re gone becomes crucial.

For business owners, having a valid, up-to-date will ensures that the business assets pass on to the intended beneficiaries. In an excellent article in Investors Chronicle, Christine Ross of Handelsbanken Wealth & Asset Management emphasizes the need for this will to be frequently reviewed, particularly if there are changes in family or business situations.

Contingency Planning for Unexpected Demise

Imagine a scenario where you die unexpectedly. What happens to your business? If your company has multiple directors, operations might continue. But, as Lauren Peters from Valkyrie Financial Advice suggests, you need to decide the specifics, like whether a family member would replace you or if an outsider would be sought. For those with limited companies, clarity in the Articles of Association and the Shareholder Agreement is paramount.

Engaging the Next Generation

Before making any decisions, Kate Aitchison from RSM suggests consulting family members about their interest in taking over the business. If they decline, you should plan for their smooth exit.

For those who are sole traders, you embody your business. Hence, upon your death, there isn’t a distinct entity to inherit. Ross recommends getting insurance against potential claims from creditors.

Shareholder Protection

What if a business owner passes away, leaving shares to beneficiaries uninterested in the business? Such beneficiaries might opt to sell their shares, which could be problematic for existing shareholders. Peters mentions the challenge of finding funds to buy back these shares. This is where shareholder protection insurance steps in, providing necessary funds without burdening the business.

However, regular review (at least every five years) of this insurance is essential to ensure it corresponds with the business’s share value.

Maximizing Tax Efficiency

Business owners can seek Business Relief (BR), which can offer inheritance tax (IHT) exemptions. Conditions apply, such as the business being unlisted and its main activity not being investment-driven. When eligible, 100% relief on unquoted shares is possible. Furthermore, assets like land or machinery may also get relief, but at a 50% rate.

However, if too much of a business’s value, turnover, or time leans more towards investment than trading, it could lose its BR eligibility.

When transferring business assets as gifts, it’s crucial to consider potential capital gains tax (CGT) implications. Aitchison points out the importance of understanding tax consequences when gifting shares within a family business.

For Beneficiaries: Steps to Take

The death of a business owner necessitates immediate administrative actions:

  1. Reporting the Death: Executors or personal representatives should register the death, obtain death certificates, and, if available, secure copies of the deceased’s will.
  2. Valuing the Estate: It’s their responsibility to determine the estate’s value, pay required taxes, and distribute assets based on the deceased’s will (or the rules of intestacy if no will exists).
  3. Informing Authorities: Promptly notify HMRC and other relevant departments using services like “Tell Us Once”.
  4. Business Continuation: If the deceased ran a limited company with other directors, tax payments and returns remain critical. For sole traders, the business typically ends with them, but financial and tax obligations must be finalized.
  5. Directorship Challenges: In cases where the sole director dies, appointing a new director is often necessary. Companies House must be informed of this change within two weeks.
  6. Banking and Funds: Ensure limited company bank accounts are cleared before dissolution at Companies House. Otherwise, funds revert to the Crown, making retrieval challenging.

To protect the business, Ross suggests granting first-buy options for shares to co-shareholders who aren’t family. Peters highlights that, for tax benefits, these agreements should remain non-binding.

Winding Up the Company

If beneficiaries opt to close the business, they can apply to strike it off the Companies House Register. However, if insolvency is an issue, professional advice is strongly recommended.


Estate planning is an indispensable aspect of entrepreneurship. It’s a testament to a business owner’s commitment not just to the enterprise’s success but to its longevity and the well-being of loved ones left behind.