It isn’t just an individual’s money and property that is classed as their Estate when he or she dies. If they owned a business then this too becomes part of a potential inheritance. By this we mean the assets.
Of course, the addition of a business makes the probate situation much more complex than if it was just a straightforward property and money probate affair. Because of this it’s always a good idea to bring in a Probate Solicitor who deals in business assets and understands the legalities of such an inclusion.
Probate and the inclusion of business assets
It may be that the business is fully functioning – or at least continuing – despite the death of its owner (who may have died suddenly). In this instance it’s important to appoint someone to be in charge of the immediate ongoing running of the company. They should be able to deal with any employee and customer concerns, as well as daily ongoing operation.
How is the business structured?
The assets will then become part of the deceased’s estate during the ongoing probate concern. The assets won’t be dealt with in the same way personal assets are.
Sole trading business
Firstly, the Executor has to work out the structure of the company. For instance, if the deceased was a sole trader then it’s straightforward enough – especially is he or she worked alone and managed the business as an individual, such as a self-employed hairdresser, copywriter, plumber etc. In this case the business assets are the same as personal assets ie they are classed as belonging to the Estate. This means that any profits – as well as losses – become part of the Estate and are dealt with according to what is stipulated in the Will.
Limited company business
As the name suggests, a limited company limits the liability for the owner. This means that any debts accrued by the business has nothing to do with the individual’s personal financial situation. In other words, if the business goes under then the business owner/s won’t lose their house or car to pay off creditors of the company.
Limited companies aren’t just restricted to small companies. They can also be large public companies that have shares in the stock exchange.
A limited company can be set up in one of two ways; either as a private limited company or as a public limited company. A private limited company is likely to be a small, independent business while a public limited company might be a large, well-known company that trades on the stock-exchange. In this case it is likely to be the deceased’s shares in the company that will be included in the Estate (rather than any fixed assets). Or, it may be that the shares are sold and added to the financial inheritance from the Estate.
Partnerships
In the event of the deceased being in a partnership with at least one other person, then each partner is responsible for debts and profits amassed. That also means they pay their own tax and national insurance depending on the profit the business makes. The type of trade that has partnerships is often a firm of architects, accountants etc.
The Deed of Partnership outlines financial details such as the amount of contribution each partner has made. It also states who is liable for certain aspects of the business and how profits are to be shared amongst the partners. Most Deeds of Partnership will also have a clause stating what is to happen to the business and profits etc in the event of one partner dying or pulling out of the partnership. The best way to deal with assets in a partnership company is to get a solicitor experienced in such matters to act on behalf of the deceased’s family.
Get in touch
Are you looking for help and advice when it comes to distributing a deceased’s business assets? Or perhaps you are simply wondering how you can make the whole process more straightforward for your family when the time comes? If that’s the case then do get in touch with the team here at Probate Forms. We can support you regardless of whether the business in question is a partnership, limited company or the company comes under the auspices of sole trading.
