When someone dies, everything they owned at the time of death goes to form their 'Estate.' This includes things such as property and money, and it will also include any business assets that the deceased owned at the time of their death.
For free initial advice and guidance call our Probate Advisors on 03306069584 or contact us online and we will help you.
Business ownership brings a complex element into the Probate process. A business asset is likely to be one of the most significant assets in the Estate and will require careful consideration. This asset will need to be dealt with in a very specific way by a Probate Solicitor who specialises in business assets.
In short, the legalities surrounding this topic are incredibly in depth and specialist legal advice will almost certainly be needed. Here we provide a brief overview of where to start when a business asset is involved in Probate.
What to Consider During Probate if the Deceased Owned a Business
If the business is operational then decisions will need to be made about the immediate day-to-day running of the business, such as whether it can continue to operate and what should happen to any employees, etc.
Aside from these considerations, the business asset itself will need to be factored into the Estate and dealt with as part of the overall Estate administration. However, it's important to note that business assets will need to be dealt with very differently to other assets in the Estate.
What happens to business assets will depend on a number of factors, but a good starting point is to establish the structure of the business.
1. Sole traders
This is where the deceased owned and managed the entire business themself, with no employees or business partners. Under this structure there is no distinction between the deceased's finances and the business' finances. This means that any debts that the business had are legally considered to be personal debts of the Estate, and similarly any net profits of the business will belong directly to the Estate.
This business structure may apply if the deceased was a self-employed plumber or hairdresser, for example.
A sole trader business that was owned by the deceased will automatically fall into their Estate when they die and be dealt with under the terms of the Will or inheritance laws.
If the deceased owned their business with one or more other people, and they managed the business between them, then this may fall into the category of a partnership. This business structure also has unlimited liability, with the owners personally responsible for debts and personally entitled to a share of any profits. Each partner will then pay tax and National Insurance contributions based on the individual profits they have made.
Businesses providing professional services such as solicitors, accountants and doctors are commonly structured as partnerships.
There should be a Deed of Partnership which sets out the financial details, including what contributions each person has made, who's liable for which liabilities and how profits will be shared, for example. The Deed of Partnership may also set out what happens to the business in the event of one partner's death. But it doesn't end there, partnerships are complex business structures and what happens to the monetary value of the deceased partner's share will also be dependent on many factors outside of the Deed of Partnership. We recommend that specialist legal advice is sought in these circumstances.
3. Limited companies
A limited company limits the liability on the business owner (unlike sole traders and partnerships). This means that it's the business itself that takes on debts or earns profits, and this is entirely separate to the finances of the owner or owners.
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.
If the deceased owned shares in a private or public limited company then they may not have been involved in the day to day running of the business, but the shares will form part of their Estate and be sold or transferred as part of the Probate process.
For more information, see Selling Shares during Probate.
Get Specialist Advice and Support
At Co-op Legal Services, our specialist Probate Solicitors are experienced in administering Estates that contain business assets. With our Probate Complete Service, can take full responsibility for dealing with any business assets that the deceased owned. We can provide specialist advice and support regardless of whether the deceased was a partner in a partnership, a shareholder of a limited company or a sole trader.
To speak with a Co-op Probate Advisor call 03306069584 or contact us online and we will call you.