Registered number: 10816512.
Registered office: Squiggle Consult Ltd, Suite 2069, Letraset Building, Wotton Road, Ashford, Kent, TN23 6LN
Squiggle Consult Ltd. is a limited company registered in England and Wales.
If you own a business, your estate planning has a second job to do. It must look after your family, and it must stop the business itself from seizing up at exactly the moment your family needs its value most. Most owners have thought hard about sales and staff, and not at all about what happens on the day they die or lose mental capacity (the ability to make your own decisions, which can be lost through illness, stroke or accident at any age). This factsheet walks through the risks for each business structure and the tools that deal with them.
A sole trader and their business are legally the same person. When you die, the business effectively dies with you: contracts can fall away, the business bank account is frozen, and your executors (the people your Will appoints to deal with your estate) must wind things down, or keep something trading long enough to sell as a going concern, if your Will gives them the power. If you lose capacity, nobody can run the business or access its account without legal authority in place.
Much depends on whether there is a written partnership agreement (the contract governing how the business is owned and run). Without one, the default rules of the Partnership Act 1890 can apply, under which a partner's death can dissolve the entire partnership, forcing the wind-up of a healthy business. A good agreement says what happens to a deceased or incapacitated partner's share: how it is valued, who may buy it, and how the estate is paid out.
A company survives its owner (it is a separate legal person), but it can still be paralysed. Your shares pass via your Will (or under intestacy), but the articles of association (the company's rulebook) and any shareholder agreement (a private contract between shareholders) may restrict who can hold shares or vote. And there is a particularly brutal trap for the one-person company.
If you are the sole director and sole shareholder and you die or lose capacity, the company may have no one with legal authority to act at all. No one can sign contracts, run payroll or instruct the bank. Wages go unpaid, and a viable business can collapse in weeks while the family waits for probate (the legal process confirming who can deal with your estate), which routinely takes months.
On death, modern "model articles" usually allow the deceased's personal representatives to appoint a new director, but older or bespoke articles may not, and probate is needed first either way. On incapacity, the position is worse: your shares cannot be voted and a directorship cannot simply be handed over. Checking your articles now, and appointing a second director or other safeguards, is among the cheapest insurance a company owner can buy.
A Lasting Power of Attorney (LPA) (a registered legal document appointing someone you trust, your attorney, to make decisions if you cannot) is usually thought of as personal protection. But you can make a separate LPA specifically for business decisions, appointing a commercially capable attorney, a co-director, your accountant, a trusted colleague, while a different attorney (often your spouse) handles your personal finances. The document can be restricted so each attorney stays in their lane.
The person best placed to run your household is rarely the person best placed to sign off a VAT return. Registration with the Office of the Public Guardian costs £92 per LPA and can take up to 20 weeks, a document to put in place now, not in a crisis. Our Lasting Powers of Attorney factsheet covers the fundamentals.
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Your Will should deal with your business interest explicitly, not leave it to fall into the residue by accident. Points a well-drafted Will covers:
For companies and partnerships with more than one owner, the gold-standard arrangement is a cross-option agreement (an agreement giving the surviving owners an option to buy the deceased's share, and the deceased's estate a matching option to sell, with either side able to trigger the sale). The funding comes from life insurance: each owner takes out cover on their own life, written in trust (held outside their estate, payable directly to the surviving owners) so the money lands quickly and tax-efficiently, ready to fund the purchase.
The result: the family receives a fair cash value promptly, and the surviving owners keep control without an unintended new shareholder. Two cautions: the agreement must be drafted as options, not a binding obligation to sell, or valuable Business Relief can be lost; and the life cover must be arranged through an FCA-authorised financial adviser: Squiggle does not provide financial advice, but we coordinate with advisers who do.
Business Relief (a relief from Inheritance Tax on qualifying business assets, such as an interest in a trading business or unquoted trading company shares) has long been a cornerstone of owner-managers' planning. The rules changed significantly in April 2026: each person now has a £2.5 million allowance for 100% relief on qualifying business (and agricultural) assets, with value above it relieved at 50%: an effective Inheritance Tax rate of 20% on the excess. AIM-quoted shares qualify for 50% relief. With IHT at 40%, the £325,000 nil rate band frozen to April 2031, and unused pensions joining estates from April 2027, larger business estates that were once entirely sheltered now face real exposure, gifts, trusts and buy-out structures all need reviewing against the new rules. Our Inheritance Tax Mitigation factsheet covers the wider picture.
A surprisingly common failure: the Will says one thing, the articles say another, and the shareholder agreement a third. A Will leaving shares to your spouse achieves little if the articles give other shareholders pre-emption rights over them, or a shareholder agreement requires a sale at a formula price. Whenever any one of the three changes, review the other two. Consistency is what makes the plan actually work on the day.
Imagine Sarah, 54, sole director and 100% shareholder of a design company employing six people. She has no second director, no LPA and a ten-year-old Will that never mentions the company. If she had a stroke tomorrow, nobody could run payroll or sign for the business; it could fail within a month. Instead, Sarah acts: she appoints her senior designer as a second director, makes a business LPA naming her accountant (and a personal LPA naming her husband), and rewrites her Will to give her executors full powers to continue or sell the business, with her shares passing in a way that uses Business Relief sensibly. A few meetings, and her family's largest asset is no longer one accident away from collapse.
This is a hypothetical example for illustration only.
Assuming the company "just carries on." Without a second director or helpful articles, a sole-director company can be unable to pay wages or sign anything for months.
Having no partnership or shareholder agreement. Default legal rules can dissolve a partnership on death and leave share transfers chaotic.
One LPA for everything, or none at all. Personal and business decisions need different attorneys. Many owners have neither document.
A binding "buy-back" clause instead of cross-options. A binding contract for sale at death can forfeit Business Relief. Options preserve it.
Ignoring the April 2026 Business Relief changes. Estates with business value above £2.5 million now face IHT at an effective 20% on the excess; planning done before 2026 may be out of date.
Inconsistent documents. Will, articles and shareholder agreement drafted at different times by different people, quietly contradicting each other.
Never having the succession conversation. Family, co-owners and key staff hearing your intentions for the first time after your death is a recipe for dispute.
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This factsheet is general information for England and Wales, not legal, tax or financial advice. Last reviewed: June 2026.
Registered number: 10816512.
Registered office: Squiggle Consult Ltd, Suite 2069, Letraset Building, Wotton Road, Ashford, Kent, TN23 6LN
Squiggle Consult Ltd. is a limited company registered in England and Wales.
