Estate planning for business owners

If you own a company, your will only deals with part of what happens when you die. It says who gets your shares. It doesn’t say who runs the company the following week, whether your executors can actually do anything with the shares, or whether your co-owners end up in business with your family. Those things are decided by the company’s articles and by any shareholders agreement, and in a lot of small companies nobody has looked at either since the company was set up.

I deal with the company side of this, which means the articles, the shareholders agreement, cross options and the paperwork for gifting or transferring shares. I don’t write wills or lasting powers of attorney. Those are done by my private client colleagues at Nexa, Samantha Downs, Donna Taylor and James Winfield, and it works best when the will and the company documents are looked at together, as each one can undo the other.

If you’re the only shareholder and director

This is the position I’d worry about most. If you die, the company still exists but there’s nobody with authority to run it. Your executors inherit the shares, but they can’t vote them until they’re registered as shareholders, and registering a shareholder is normally a job for the directors. There aren’t any.

The model articles deal with this. Article 17(2) lets the personal representatives of the last shareholder appoint a director where the company has been left with no shareholders and no directors. Plenty of companies don’t have it though, particularly those set up before October 2009 on the older Table A articles, or with bespoke articles that have never been updated. Without it the executors may need a court order under section 125 of the Companies Act 2006 before they can do anything, and in the meantime the bank account is usually frozen and the staff and suppliers still need paying.

I’ve acted for executors in this position, and I’ve written about it in more detail in what happens when a sole shareholder and director dies. Fixing it while you’re alive is not a big job. I check the articles, and if the provision is missing the company adopts new articles by special resolution. It’s also worth thinking about whether to appoint a second director now, although that isn’t something to do casually, as a director takes on real duties.

If you lose capacity

People plan for dying more often than they plan for a stroke or dementia, but for a company the second can be the harder one, as you’re still the shareholder and may still be the director.

A lasting power of attorney for property and financial affairs lets your attorney deal with your shares, including voting them. It doesn’t make your attorney a director, as that’s a personal office and they’d need to be appointed in the usual way. Under the model articles a director also stops being a director if a doctor gives a written opinion that they’ve become incapable of acting and may remain so for more than three months (article 18). So with a sole director the company can end up with nobody in charge, and an attorney who has to use the shares to appoint someone.

Some owners make a separate LPA for their business interests, with an attorney who understands the business, so that it isn’t left to a spouse or child who has never been involved. My colleagues will advise you on that and prepare it. My part is checking that the articles allow the attorney to do what you’re expecting of them.

If you have business partners

Where there are two or more shareholders the company can carry on, but there’s a different problem. Unless the articles or a shareholders agreement say otherwise, your shares go to whoever your will says, which is often your spouse or children. Your co-owners may then have a new shareholder who doesn’t work in the business and wants an income from it, and your family may be holding shares they can’t sell and which pay nothing unless the directors decide to declare a dividend.

Most owner-managed businesses I act for would rather the surviving shareholders bought the shares and the family received the money. That’s done either in a shareholders agreement or with a cross option agreement, usually backed by life insurance so that the survivors have the money to pay for them. The documents need to say how the shares are valued and when the price is paid.

The way the agreement is worded affects inheritance tax. Options are generally used instead of a binding agreement to sell, as a binding contract for sale can lose business property relief on the shares. That’s one of the points to take tax advice on (see below).

Leaving shares to family who won’t work in the business

Sometimes the owner wants the shares to go to their spouse or children, during their lifetime or under the will, but the family aren’t going to work in the company.

It can be done, but ordinary shares come with votes, and enough votes can remove the directors. If the people running the business after you are different from the people who own it, you need to decide who has control, and how the family gets paid, as shareholders only receive money if a dividend is declared.

There are a few ways of dealing with it. The company can create a separate class of shares for the family, with rights to dividends but no votes or limited votes. The shareholders agreement can set out a dividend policy, so the family aren’t dependent on the goodwill of whoever is in charge. The working shareholders or the company can be given an option to buy the family’s shares later on at a fair value. Or the shares can go into a trust under the will, with trustees who can deal with the directors on the family’s behalf. Which of those suits you depends on the family and on the tax position, so I’d work it through with your accountant and with whoever is writing the will.

Inheritance tax

I don’t give tax advice, and you’ll need an accountant or tax adviser involved. I mention it because the rules on business property relief changed in April 2026. Trading company shares used to qualify for 100% relief whatever they were worth. As I understand it, full relief now applies only up to an allowance of £2.5 million per person, with 50% relief above that. Owners who never had to think about inheritance tax on their shares may now need to, and it can affect whether you give shares away during your lifetime, leave them in your will or arrange for them to be sold. HMRC’s guidance on business relief is the place to start.

What I’d need from you

Send me the company’s articles (or just the company name, as I can get them from Companies House), any shareholders agreement, and a short note of who owns what and what you’d like to happen. I’ll read them and let you know where the gaps are and what it would cost to put them right. The work is done for a fixed fee which is agreed in writing before I start. If you need a will or an LPA as well, I’ll introduce you to one of my colleagues, who will quote for that separately.

If that would be useful, get in touch.