Comprehensive Guide to Estate Planning for Business Owners

What is business estate planning?

Estate planning for business owners is the process of deciding how your business interests and personal assets will be managed, transferred, or sold if you die or become unable to run things.

Business estate planning is usually more complicated than regular estate planning. It needs to consider:

• Ownership structures
• Succession
• Liquidity
• Tax efficiency

Why estate planning matters for business owners

Protection for everyone

A well-structured estate plan protects both your family and any non-family shareholders. With the right setup, your family can access the value of the business, while non-family shareholders keep control. This helps secure your family’s finances and your business's future.

Business continuity

Having an estate and business succession plan lets you choose who will take over your business and how it will be managed. This helps prevent disruptions and keeps your business operating smoothly.

Asset protection

Estate planning can help you put the right structures in place to protect your business and assets from creditors and other claims.

Minimising tax

A key part of estate planning for business owners is to reduce estate taxes. By organising your business assets well and using tax reliefs, you can leave more to your loved ones.

Avoid family conflict

Having a clear plan helps avoid confusion and sets expectations, especially when family members are involved. If you have a family business, estate planning can help avoid disputes and prevent legal challenges.

Estate planning considerations for business owners

Estate planning is often more complicated for business owners. Here are some important things to think about:

• Succession planning:identify the key people who will take over and run the business.
• Tax Exposure:understand what estate taxes may apply and what reliefs are available.
• Asset types:make a clear distinction between personal and business assets in your estate plans.
• Cross-border rulesfor those with business interests and assets overseas.

All these factors affect how your business can be passed on or managed after you’re gone. Even experienced business owners can make mistakes, so good planning and regular reviews are important.

Business succession planning vs estate planning

Business succession planning and estate planning are closely linked, but they are not the same.

The key distinction is this:

• Succession planning decides who runs the business
• Estate planning decides who owns the business

A business succession plan outlines who will run the business and how leadership and control will change hands if an owner retires, is unable to continue, or passes awaw.

The purpose of business estate planning is to decide who will own a share of the business after an owner’s death, and how that ownership is transferred, valued, and taxed as part of the estate.

Key estate planning documents for business owners

Key documents typically include:

• A will
• Trusts
• Succession plan
• Lasting Power of Attorney
• Shareholder and partnership agreements

Wills

A will is the cornerstone of estate planning, outlining how your assets should be distributed. For business owners, it’s important to draft it carefully.

A poorly structured will can:

• Conflict with shareholder agreements
• Create uncertainty around control
• Delay decision-making

Your will should clearly reflect your business interests and align with the other documents in your estate plan.

If you own a business in another country, you might need a second will. For example, a UK will may not be recognised by another country’s legal system.

Trusts

Trusts are often used in estate planning for business owners. When set up correctly, they can offer:

• More control:A trust can offer control over how assets are managed and distributed.
• ProtectionTrusts can protect your business assets from creditors and legal challenges.
• Tax efficiency:Some trusts can lower the value of your taxable estate and reduce your exposure to Inheritance Tax (IHT).

There are several types of trusts, but most are either revocable or irrevocable. Each type works differently, so it’s important to choose the one that fits your personal and business needs.

To learn more, check out our guide to estate planning trusts.

Succession plan

Business succession planning focuses on the future operation of the business. It answers questions like who will lead, how roles will change, and how the business will keep going.

Common options include:

• Passing the business to family members
• Selling shares to business partners or management
• Selling to a third-party
• Naming existing employees to take over key roles

Shareholder and partnership agreements

Shareholder and partnership agreements are important for succession planning. Both set out how the business will run and who will own it, but they differ depending on your business structure:

• Shareholders' agreementfor private limited companies owned by more than one shareholder.
• Partnership agreement:for an unincorporated business run by two or more people.

Both options typically include:

• Buy-sell clauses triggered by death or incapacity
• Clear valuation methods for ownership interests
• Rules governing control and voting rights

Lasting Power of Attorney

A Lasting Power of Attorney (LPA) is an important estate planning document for business owners.

An LPA is a legal document that allows you to name one or more people to manage your business if you become unable to do so. This helps protect the company and ensures that someone you trust is in charge.

If you do not have an LPA in place, the courts may appoint someone to manage the business.

Tax planning for business owners

Tax efficiency is an important part of any estate plan, and it’s especially important for business owners.

There are three main estate taxes to consider:

• Inheritance Tax (IHT):business interests are often included as part of your estate, meaning they may be subject to IHT.
• Capital Gains Tax (CGT):may apply when business interests are transferred or sold.
• Income Taxcan apply to income earned between the date of death and the date the estate is settled.

To help determine how much Inheritance Tax could be due on your estate, use our online calculator.

How can business owners reduce estate taxes?

There are several effective strategies to reduce estate taxes.

Trusts

Some trusts take assets out of your estate, which can protect them from Inheritance Tax. They also usually avoid probate, so assets transfer faster and your affairs stay private, since the probate process is public.

Reliefs and exemptions

Business Relief allows you to claim either 100% or 50% tax relief, depending on the type of business and how you own it. It can help reduce Inheritance Tax by lowering the value of a company you own or its assets, provided they have been held for at least two years before you die.

Lifetime gifting

You can give gifts tax-free while you’re alive. This lowers your estate’s value and the Inheritance Tax owed. You should carefully plan your gifting strategy to avoid unexpected tax issues.

To learn more, read our guide to estate tax planning.

Securing your business and your legacy

Estate planning for business owners is about control, continuity, and confidence. With the right plan, your business can keep thriving while you protect your family, your wealth, and your legacy.

Taking action early and reviewing your plans regularly are the best ways to protect your business. To get started, talk to one of our expert wealth managers.

We work with our legal partners to offer a full range of estate planning services, tailored to your needs and goals.

Protect your business and your legacy today. Book a free, no-obligation meeting to see how we can help.