How to Leave Business Assets in Your Will

Understanding how to ensure the seamless succession of your business after your death is a crucial component of both personal estate planning and business risk management. For entrepreneurs, business owners and professionals with significant commercial interests, integrating business assets into your estate plan is not merely about assigning financial inheritances—it is also about preserving livelihoods, honouring relationships, and securing the longevity of everything you have worked hard to build. Whether you run a small family business, control significant corporate shares, or hold intellectual property vital to your operations, detailed planning now will protect your legacy long into the future.

In this article, we explore the essential considerations for leaving business assets through a will, the legal and strategic mechanisms involved, and practical guidance to help business owners formulate a tailored and legally sound plan for the transition of their commercial interests after they are gone.

Understanding Your Business Structure

Before engaging in specific estate planning strategies, it is imperative to first understand how the legal structure of your business affects your ability to bequeath assets. Different types of business entities in the UK come with different transfer rights, obligations and limitations upon death.

For sole traders, the business is not a separate legal entity. It is legally indistinct from the business owner and forms part of their estate. This means any assets associated with the business—such as equipment, stock, debts owed, and goodwill—are automatically included in the individual’s estate and can be dealt with via the will.

In a partnership, the position is more nuanced. Typically formed under the Partnership Act 1890 or a bespoke partnership agreement, the death of one partner may result in the dissolution of the partnership, unless otherwise provided. Well-drafted partnership agreements often include clauses outlining death and succession provisions, such as permitting the continuation of the business or enabling the purchase of the deceased partner’s share by remaining partners.

Incorporated businesses such as private limited companies (Ltd) are separate legal entities under UK law. Unlike unincorporated structures, shares in a company are typically considered transferrable assets subject to the terms of its Articles of Association or any existing shareholder agreements. Shareholders can leave their shares to a named beneficiary in a will, assuming no restrictions prevent such a transfer.

Knowing where your business lies legally allows you to craft an effective strategy to transition your interests appropriately.

Identifying Your Business Assets

Many business owners underestimate the wide array of assets they accumulate over time. It is not uncommon for these assets to be fragmented or partially documented. Before making arrangements in a will, it is important to conduct a thorough audit of your business interests.

Business assets may include tangible assets such as premises, machinery, vehicles, equipment and inventory. It may also include intangible assets like business goodwill, brand reputation, intellectual property rights, trade secrets, licences and permits. Financial components like account receivables, company bank accounts, pensions and investments also form part of your business estate. Lastly, ownership interests—like shares, partnership interests or directorship rights—are central to business succession planning.

A full and up-to-date inventory of your business assets lends clarity to your will and estate planning process. It reduces the likelihood of disputes, speeds up probate and allows executors to act confidently and effectively on your behalf.

Creating a Business Succession Plan

Leaving your business assets in a will addresses the legal transfer of ownership, but it does not by itself guarantee the operational continuity of your business. A business succession plan runs in parallel with your will and offers more practical, forward-looking guidance.

Succession planning is the process of defining how your business should continue following your death. This can involve appointing a management successor, negotiating buy-sell agreements, establishing funding mechanisms, or creating trusts to manage shares or voting rights in the long term. A good succession plan ensures that your death does not result in disruption, financial loss or uncertainty for employees, lenders or clients.

Elements of an effective succession plan often include:

– Identifying and training a successor (either within your family, senior staff, or external candidate)
– Clarifying operational procedures and roles
– Forecasting the financial implications of succession
– Determining whether the business should be sold, wound down or continued as a going concern
– Ensuring legal structures, insurance policies and governance documents align with your succession goals

Working with a solicitor and possibly a business consultant, financial adviser and tax specialist will help produce a comprehensive, future-proof plan that dovetails with your will and other estate documents.

Drafting Your Will to Include Business Provisions

Including business assets in your will requires careful wording to ensure clarity and enforceability. Ambiguities, inconsistencies or omissions may result in protracted probate processes or legal disputes between heirs.

An effectively constructed will should identify the specific business assets and assign them clearly to named beneficiaries. This may involve:

– Leaving a fixed share of your business to a specific person
– Allocating business premises or other physical assets to heirs
– Creating a trust to hold and manage business assets on behalf of beneficiaries
– Providing the right to income generated by the business, without transferring operational control
– Granting family members a right of first refusal on any future sale of the business

It is crucial to coordinate the drafting of your will with the business’s legal documents. For example, if a company’s Articles of Association prohibit the transfer of shares outside of predefined procedures or to non-family members, any contrary instruction in your will could be invalid or cause disruption.

Additionally, executors named in your will should be capable and willing to handle business matters. Appointing someone with commercial knowledge or adding a separate business executor may be appropriate.

The Role of Shareholder Agreements and Articles of Association

Many private businesses are governed by shareholder agreements or constitutional documents specifying what happens in the event of an owner’s death. These documents often override or restrict testamentary provisions in a will. It is therefore essential to align your estate planning with existing agreements.

Shareholder agreements typically address:

– Rights of remaining shareholders to buy out the deceased’s shares
– Mandatory sales or buyback clauses
– Price and valuation methods for transferring shares
– Restrictions on who may inherit shares

Where such provisions exist, the will should either complement them or specify the intended beneficiaries subject to the terms of the agreement. Discrepancies between a will and corporate documents can create legal conflict or delay.

Reviewing and updating your shareholder agreements routinely—and especially after significant life events—is strongly recommended. Where no agreement exists, crafting one while healthy and capable provides much-needed direction and reduces uncertainty upon your death.

Using Trusts to Manage Complex Interests

For complex or valuable business assets, leveraging trusts can be an effective solution for control, asset protection and taxation efficiency. Trusts allow the business owner to separate legal ownership from beneficial entitlement, which can be useful in multi-generational or family business scenarios.

For example, a discretionary trust could be established in the will to hold the business on behalf of multiple family members. This allows trustees to make decisions about income distribution and asset management according to changing circumstances, such as economic shifts or the development of beneficiaries’ business acumen.

Alternatively, an interest in possession trust may allow a spouse or partner to receive income from the business, while preserving the capital for children upon their death. These structures ensure flexibility, prevent fragmentation of business control, and can be designed to mitigate Inheritance Tax (IHT) exposure.

It is essential to involve professional trustees or experienced advisers if your business interests are to be held in trust, to ensure decision-making capacity, regulatory compliance and alignment with your long-term intentions.

Tax Implications and Inheritance Tax Reliefs

Business owners must consider the tax implications of passing along commercial assets. In the UK, Inheritance Tax may apply to the estate of a deceased person above the nil-rate band (currently £325,000). However, special reliefs may offer valuable mitigation, particularly for qualifying business assets.

Business Property Relief (BPR) can reduce the value of qualifying business assets by either 50% or 100% for IHT purposes. Sole trader businesses, shares in unquoted companies, and certain interests in partnerships may qualify for 100% BPR if held for at least two years prior to death. Land, buildings or machinery used in the business may qualify for 50% relief if certain conditions are met.

To maximise BPR:

– Ensure your business meets the qualifying criteria (for instance, trading vs investment activities)
– Avoid significant periods of inactivity leading up to your death
– Review asset classification (some items might be considered personal rather than business-related)
– Keep detailed records and ensure your accountant can document BPR eligibility

Efficient use of BPR can protect the continuity of your business and reduce the Probate liability on your heirs, allowing them to inherit more and maintain operational control.

Dealing with Business Debts and Liabilities

Business debts do not disappear with your passing. Assets and liabilities associated with your business will be dealt with by your estate. It is important to understand that your beneficiaries are generally not liable for business debts personally, but these liabilities can significantly impact the value of any inheritance.

Sole trader businesses are at particular risk, as the owner’s estate becomes responsible for all personal and business obligations upon death. In contrast, the liability for company debts in incorporated businesses often remains with the company, unless personal guarantees were given.

Estate planning should consider:

– Willingness or capacity of heirs to continue running the business
– Insurance policies (e.g., key person insurance or business continuity insurance)
– Contingency plans for discharging debts and capital obligations
– Planning liquidity to prevent forced sales of assets to meet creditor claims

Preparation in this regard can shield your family from financial strain and assist executors in settling the estate efficiently.

Communicating your Intentions and Keeping your Plan Updated

One of the most overlooked aspects of leaving business assets in a will is proactively communicating your plan. Families and business colleagues benefit enormously from clarity. While the will is a legal document, your intentions, values, and rationale often require broader context. Discussing your estate and succession plans openly with key stakeholders—such as family members, business partners, and appointed executors—can prevent misunderstandings, reduce conflict, and foster unity during what will already be a difficult time.

You might also consider creating a “letter of wishes” alongside your will, offering informal but meaningful guidance to your executors and beneficiaries. This document can articulate your hopes for how the business will be run, who should be involved, and the legacy you wish to preserve, without imposing legal obligations.

Finally, estate plans should not be static. Life events such as marriage, divorce, the birth of children, or business restructuring can render prior provisions outdated or even invalid. Regularly reviewing and updating your will, shareholder agreements, insurance arrangements, and trust documents ensures they remain aligned with your evolving circumstances and objectives.

Conclusion

Passing on a business through your will requires more than good intentions—it demands careful coordination, legal precision, and a forward-thinking approach. Whether your enterprise is a sole proprietorship, a dynamic SME, or a multi-generational family business, early planning can safeguard your life’s work and empower your successors. With the right legal, financial, and strategic tools in place, you can ensure that your commercial legacy endures—not just as a set of assets, but as a thriving, resilient enterprise for the future.