Business Wills Essential For Smooth Transition
You don’t have to be a member of Australia’s richest family to become embroiled in a bitter dispute over what happens to a business when the person who built it dies, retires or can no longer work due to ill health.
There can be dire consequences if there are no plans in place for what happens to a business once the owner or founder of the operation departs.
Partners, customers or clients may leave as they don’t like the new owners or disagree with new policies.
Family members, shareholders and unitholders may lose their rights in the business if outsiders inherit and move in.
The future direction of the business may change against the wishes of continuing owners.
A former spouse or partner may have a claim to the owner’s shares or units in the business if their relationship breaks down.
The owner may sell their shares or leave them in their will to someone who is not acceptable to continuing owners.
To avoid this happening it would be wise to consult a skilled business lawyer to draw up a proper “Business Will” – an agreement by business stakeholders that clearly states what will happen when the owner is no longer on the scene.
It would be set up as a Shareholders’ or Unitholders’ Agreement entered into by all those involved.
One of the priorities would be to set up an agreed mechanism for resolving future disputes, such as ensuring an owner wishing to leave or sell out must first offer their shares to continuing shareholders.
Similarly, a disabled owner or the estate of a deceased owner will continue to be entitled to income from the business. They or their estate would have to sell their interests to continuing owners.
An agreement might stipulate that no one can become an owner of the business unless all of the other owners agree. If an owner can no longer work or has passed away, this could require them or their estate to sell their shares or units to the other owners.
It’s important to remember assets owned by a company or trust are not owned by you personally, even if you control the company or trust. So assets held by a company will not form part of your estate when you die and cannot be left to anybody in your will. Similarly, jointly held assets will pass to the survivor if one of you dies and cannot be left in your will
This means it’s vital you consult a legal expert in wealth protection and plan for all possibilities to ensure your wishes are carried out.