Most owner-managers have a will, however, very few have one that says anything useful about the business they spent years building.
If you run your own business, you have probably thought about what would happen to your family if something happened to you. You may well have a will in place, and that is a great start, but here’s a question that might catch you out: what does your will say about the business itself?
For many people the answer this could be nothing at all. The will deals with the house, the savings and perhaps a few personal items, and the company is either not mentioned or is simply placed into "everything else". That can leave the people you care about most with a business they do not know how to run, cannot easily sell, and may not even be legally able to control.
September tends to be the month when business owners get back to planning after the summer, so it is a sensible time to look at this properly. This article explains what happens to a business when its owner passes, where the gaps usually are, and the handful of documents that close them.
What happens to a business when the owner passes?
It depends on how the business is set up, and the differences matter more than most people realise.
If you are a sole trader
Legally, you and the business are the same thing. When you pass, the business goes with you. Its assets become part of your estate and are dealt with through probate, but there is no separate entity that carries on trading. Contracts may end, bank accounts are frozen, and staff can find themselves without an employer. If the business has real value, your executors will need to act quickly to preserve it, and they will need the authority to do so.
If you are in a partnership
What happens is governed first by your partnership agreement, if you have one. Many agreements say the partnership continues and the deceased partner’s share is paid out to their estate. Without an agreement, the default rules under the Partnership Act 1890 can mean the partnership is dissolved automatically, which is rarely what anyone intended.
If you own shares in a limited company
The company itself carries on trading, and your shares become part of your estate. Your executors look after them until they can be passed to whoever inherits under your will. On paper that sounds fairly simple, but in practice it is where the problems tend to start.
For one thing, your family may find themselves inheriting shares in a company they cannot actually vote in, because the shares still need to be formally registered in their name. The company's articles or a shareholders' agreement can also get in the way, since these often restrict who shares can go to or give the other shareholders first refusal on buying them.
The bigger issue comes if you were the only director. In that situation there may be nobody with the legal authority to run the company until the shares have been sorted out, which means no one can sign contracts, pay the wages or get into the bank account. This happens more often than you might expect, and newer model articles do allow the deceased's personal representatives to appoint a new director. Older articles frequently have no such provision, and while everyone works out what to do the business can suffer real damage.
Where wills usually fall short
Even a well-drafted will can leave gaps when a business is involved, and these are the ones we see most often:
- The business is not mentioned at all, so it falls into the residue of the estate and goes to whoever inherits "everything else", who may have no interest in or ability to run it
- The will contradicts the shareholders’ agreement or articles, because the will leaves shares to a spouse, but the company documents say they must first be offered to the other shareholders. The company documents generally win, which can leave a family expecting an asset they never receive
- No one has been given the power to run the business in the meantime, so executors are forced to act cautiously and the business drifts
- Inheritance tax has not been considered, and a valuable business can push an estate well over the tax-free thresholds
- The will was written before the business existed, or before it grew, and has simply not kept up
None of these are difficult to fix. They are just easy to overlook, because the will and the business tend to be dealt with by different people at different times.
Inheritance tax and business property relief
For many owners, the business is the most valuable thing they own. Historically, business property relief has meant that most trading businesses could pass on death with little or no inheritance tax, which is one reason the issue has not always felt urgent.
From April 2026, 100% Business Relief is limited to the first £2.5 million of qualifying business and agricultural property combined, with qualifying value above that generally receiving 50% relief. Any unused allowance can also potentially be transferred between spouses and civil partners. In practice, this means that owners of higher-value businesses may now face an inheritance tax liability where previously full Business Relief may have been available, which we have written about in our guide to the pension changes for executors and will makers.
The detail of the relief rules is on the business relief page on GOV.UK. The point for owners is simple however, if your business has grown, the assumptions behind your existing will may no longer hold, and a review now can save your family a significant amount later.
Making your legal documents agree with each other
Protecting a business when you die usually comes down to a handful of documents working together. Each one covers a different risk, and the real value comes from making sure they all say the same thing.
A will that deals with the business specifically
Your will should say clearly who is to receive your business interest, whether that is shares, a partnership share or a sole trader’s assets. It can also give your executors specific powers to carry on the business, employ managers and take decisions in the short term, which can make the difference between a business that survives the transition and one that does not. If it has been a few years since your will was written, our article on why making a will in your 30s matters is a reminder of how quickly circumstances change.
A shareholders’ agreement that matches the will
If you are in business with others, a shareholders’ agreement should set out what happens to a shareholder’s shares on death. Do the survivors buy them? At what price? Over what period? The will then needs to be drafted with that agreement in mind, so the two documents point in the same direction rather than against each other.
A cross-option agreement and insurance
A cross-option agreement gives the surviving shareholders the right to buy the deceased’s shares, and the deceased’s estate the right to require them to. It is usually backed by life insurance, so the survivors have the money to pay. The family receives a fair value in cash rather than shares they cannot use, and the business stays in the hands of the people running it. Set up correctly, this can be done without losing business property relief, which is why the drafting matters.
A business lasting power of attorney
If you lose the ability to make decisions through illness or accident, the same problems arise, often with less warning. A lasting power of attorney that specifically covers your business affairs lets someone you trust step in and keep things running. You can have a separate business LPA from your personal one, so the person managing your company does not have to be the same person managing your household finances.
Up-to-date articles and a second director
For sole directors in particular, a simple check of the company’s articles and, where appropriate, appointing a second director or confirming that your executors can appoint one, removes the single biggest practical risk. Our guide to directors’ duties explains the responsibilities that come with the role.
What your family would face
It helps to think about this from the other side. Your executors will be grieving, and they will be dealing with a process that takes months even when it goes smoothly (our guide to how long probate takes sets out the timeline). Into that they may inherit a business with staff to pay, customers to serve and a bank that will not talk to them.
Executors also carry personal responsibility for getting things right, and a business adds complexity that catches even careful people out.
Our article on common mistakes executors make covers the general pitfalls. Good planning now means the people you leave behind are given a clear path rather than a maze to navigate.
A simple September checklist
If you want to know where you stand, these questions will get you most of the way there.
- Does my will mention the business at all, and does it name who should receive it?
- Do my company’s articles or shareholders’ agreement say anything different from my will?
- If I were the only director, who could legally run the company next week?
- Is there insurance in place to fund a buy-out of my shares, and an agreement setting out how that works?
- Have I checked the inheritance tax position since the business property relief rules changed?
- Do I have a lasting power of attorney that covers business decisions?
If the answer to more than one of these is "I am not sure", it is worth a conversation. Our legal checklist for growing businesses covers the wider protections a business should have in place alongside these.
Speak to our team
Most business owners put a great deal of care into the company and comparatively little into what happens to it if they are no longer there. It is not a comfortable subject, but the planning itself is usually straightforward, and it protects both the business and the people who depend on it.
At Salehs, our wills and trusts team and our corporate and commercial team work together on exactly this kind of planning for owners across Manchester and the North West, so the will, the company documents and the tax position are looked at as one piece rather than three. If you would like to check that your legal arrangements do what you think they do, please get in touch.