Latimer Hinks Solicitors, one of Darlington and County Durhams longest established law firms, is urging North East business owners to get their succession planning in order after research showed more than 65% have no arrangements in place for the event of their death.
In the Latimer Hinks poll, 50% of respondents said they hadnt even considered such a plan. A further 16.7% were aware that such planning could be conducted but had decided against, or neglected doing so.
Latimer Hinks Solicitors are urging businesses to prioritise creating a so-called company will as a main step to ensuring the security of the business should anything happen to the owner.
If a firm is run by a partnership, a deed of partnership should set out what will happen should a partner die or wish to leave. It is not necessary but it is a good idea to prevent misunderstandings or disputes.
Without the appropriate business succession strategies an individuals partner and children may not inherit their share of the business. There is the chance that the business may have to be sold and the proceeds become liable to inheritance tax and capital gains tax.
Business partners may not be able to buy out the deceaseds share and the surviving spouse or children may be obliged to take over the running of the business.
Anne Elliott, Partner at Latimer Hinks Solicitors, said: "Many see long-term planning as devising an exit strategy that involves them living long into their retirement, but none of us know what is around the corner.
"An example of a "company will is an agreement for the deceaseds family to receive cash, usually by way of the proceeds of a life policy, with the surviving directors/partners receiving the deceaseds share of the business. Given that every business is unique, every "company will needs to be bespoke.
Anne added: "Failure to prepare for the future of the business can leave a legacy of heartache and turmoil with family and shareholders/partners in dispute. This is hugely expensive and distracting, and forward planning, utilising the right professional advice has to be the solution.
"Setting up a company will is a sensible move. It ensures that you retain both control and access to all your property and guarantees that your assets are held in a tax efficient environment.