Business Succession Planning

Business Succession Planning – An often overlooked tool.

Small and medium size enterprises (SME) make up the backbone of the UK.

At the start of 2014:

  • There were an estimated 5.2 million businesses in the UK which employed 25.2 million people, and had a combined turnover of more than £3,500 billion
  • Small firms accounted for 99.3 per cent of all private sector businesses in the UK, 47.8 per cent of private sector employment and 33.2 per cent of private sector turnover
  • Small and medium sized businesses employed 15.2 million people and had a combined turnover of £1.6 trillion.

Of all businesses, 62 per cent (3.3 million) were sole proprietorship’s, 29 per cent (1.5 million) were companies and nine per cent (460,000) partnerships

18% of all SMEs in the UK private sector operate in the Construction sector while 15% operate in the Professional, Scientific and Technical sectors.
Wholesale and Retail Trade accounts for over a third of all SME turnover (35%)

It is likely that very few of these businesses will have any, or have given any thought to business succession planning or an exit strategy; or to what would happen if they were unable to manage their own or their business affairs.

Especially when there are tools that an Estate Planner can put in place to help protect the longevity of a business and ensure that the wishes of the business owner are put into place should anything happen. This can be effectively managed through proper business succession planning.

It is a common misconception that you need a Will for your personal property and a separate Will for your business assets. The truth is, your Last Will and Testament governs the distribution of all of your property. An important consideration however is that it needs to be written properly to ensure that gifts and provisions will not fail. The inclusion of business property within a Will can complicate the process so it is probably wise to seek professional advice.

When considering business succession planning, some of the following may be important:

A Business Will

‘It is a common misconception that you need a Will for your personal property and a separate Will for your business assets. The truth is, your Last Will and Testament governs the distribution of all of your property’. This means that you can make provision in your Will for your business and business assets.

A Business or Commercial LPA

In short a commercial LPA is a document allowing you to appoint a person or persons to make decisions for you if you were unable to make them for yourself. This document gives restricted authority for attorneys to make decisions in relation to your commercial activity. It is a separate document from any other LPA.

Partnership and Shareholder Agreements

A shareholder or partnership agreement are agreements between shareholders or directors of a company containing the terms of the business partnership and what should happen in relation to business succession. In other words they dictate what should happen to the shares of the directors in the event of their death. The agreements can also include information about how the business should be managed on a day to day basis for proper continuity.

Memorandum and Articles of Association

According to the GOV website, ‘when you register your company (private limited company) you need:

  • a ‘memorandum of association’ – a legal statement signed by all initial shareholders agreeing to form the company
  • ‘articles of association’ – written rules about running the company agreed by the shareholders, directors and the company secretary’

Cross-option Agreements

A cross-option agreement is an agreement put in place between shareholders of a business allowing for the surviving shareholders the option purchase the deceased’s shares. Again, this is a perfect tool for business continuity.

Business Property Relief (BPR)

Effective succession planning when it comes to your business can save a lot of time, hassle and money. Businesses incur inheritance tax as well. A person may incur Inheritance Tax charges if their estate is valued at over £325,000. The value of your business may be included within the value of your estate. As such you can plan and mitigate tax through business property relief. This is essentially a relief against Inheritance Tax of up to 100% on some estate’s business assets but this needs to be claimed for using IHT forms. A business must also meet certain conditions to qualify for relief.


If you own a business and haven’t given any thought to how you would like to pass this on if something happened to you then provision can be made in your Will. It’s prudent to consider business succession planning.


If you’re an Estate Planner and would like training on Business Succession Planning then visit The College of Will Writing.

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The Society of Will Writers is a non-profit making self-regulatory organisation whose primary objectives are the advancement, education and ethical standards within the will writing profession.

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