If you have set up a business in the recent past the likelihood is that thoughts of what will happen to it once you are no longer around will not have crossed your mind.

If this sounds like you, you are not alone. A recent survey suggests that only 10 % of family businesses in the UK have any succession plans in place.

However, leaving things to chance could not only place the business (that you have dedicated an enormous amount of time and effort to building) in a perilous position, but could also short change your loved ones. Having dealt with many situations in which business owners have not made adequate plans, taking some time to put a proper structure in place sooner rather than later is certainly the more favourable option.

The value of a will should not be underestimated, providing your family with the security needed during an understandably turbulent period. But making a will can’t do everything. For example, it can’t force someone to buy the shares you held in your business. So how would your family benefit financially from the business you built up before your death?

Consider: Do you expect your family to benefit from the value you built in the business while you were working? If so, who is going to buy your share of the business and what is a fair price? The questions may be endless but good planning – to include a will and a cross-option agreement – can provide an answer to them all.

A cross option agreement gives the surviving business owners the opportunity to purchase the shares owned by the deceased. The agreement can stipulate the price and how the surviving owners will fund the purchase. Typically this is via life insurance, using the proceeds to purchase the remaining shares of the business upon the death of one of the owners.

For more help and advice in relation to succession planning, please get in touch with us.