What would happen to his Business in the event of Death?

[mebythesea]

Hi there
I'm just wondering if anyone can help with this as I really don't know where I stand with regards to my partners business.

We are both writing our wills at the moment, and we are wondering what would happen to the business if he died or became incapacitated.

I am not a partner in the business, he is as a sole trader. However it is our full income, our livelyhood depends on the business. And because we are writing our wills it has highlighted the possible vulnerability of the situation. The business employs 4 people and turns over aprox 1million. The business has grown very fast and so we have'nt really had time to think about things like this.

Should we make some documented agreement to state that I can manage the business in the event of his death or incapacity? if so what would this be called?

So if the worst happened, someone would have to sort it out/keep things running if he couldn't, and if it is not in writing before the event I can imagine wecould get into all sorts of legal nightmares trying to sort it out, and in the mean time the business could go down the pan. Shutting the stable door after the horse has bolted as they say. Should he make me a partner? or a limited company?

We have been together for 12 yrs, with 3 dc's but are not married.

Would it make good financial sense to get married, and would this give me some legal standing with regards to his business?

Sorry if this is'nt written very well, as you can tell I'm not very legally savvy.
Thanks for reading this far!, any tips, pointers, advise very welcome! :)

I think the easiest answer is for your partner to set up a limited company. That way you can both become directors, holding 50% of the shares each. Upon either of your deaths, if you put it in the Will, the company can be bequeathed to the other. Setting up a limited company is easy and cheap - can get it for around £17 on the internet. I would however recommend you find a good accountant who can keep you on the straight and narrow with regards to the legalities that are expected from Companies House with regards to Returns.

also a limited company gives tax benefits - you could both take money as dividends and reduce the tax bill.

You can create a power of attorney that would enable you to manage the business on his behalf if he was incapacitated, but if he should die it becomes very messy - effectively his estate would have to sell the business to you, the taxman would get involved and want to take a cut as inheritance tax, existing contracts would have to be novated or renegotiated etc. It would make very little difference if you were married (except for the inheritance tax).

So from this point of view alone, you should incorporate as a company - but as the last post hints at you should save thousands in tax. Get an accountant involved before you do anything because the transfer of the business to the company needs doing right to maximise the tax savings.