You can certainly inherit a business when someone passes away, but there are many considerations, including whether or not it is stipulated in a will, which relatives will inherit the business and if there are any other business partners involved.
In reality, inheriting a business can be complex, with different legal rules, taxes and personalities involved. Unsurprisingly, with 600,000 deaths recorded in the UK each year, thousands of families and businesses face these kinds of issues every year.
Inheriting a Business When There Is a Will
When the deceased person has left a will and it includes information about their business, this makes life much easier. Typically, a will includes who inherits the business or the owner’s share of it. This may be left to another business partner, a family member or various other stakeholders.
In the will, an executor is allocated as the person responsible for overseeing the carrying out of the will. This person is often a spouse, child or close personal friend with a cool head and is responsible. The executor will ensure that the right person is given the ownership of the business.
As soon as probate is granted, typically within 12 months, the business assets can be transferred to the new beneficiary or owner. This will include shares of the business and could also include equipment, stock, premises and more.
When it comes to transferring shares for a limited company, this can still take several months for paperwork and the right valuations to be completed. During this time, the business may need temporary management to keep it running.
Can You Inherit a Business If There Is No Will?
If someone dies without a will, they are said to die intestate and this is where things get sticky and could be complicated.
In this case, strict legal rules decide who will inherit the business. Usually, a spouse or civil partner comes first and then this is followed by children and then other relatives. In fact, a business partner or close friend may receive nothing unless legally entitled.
This can cause problems if the person who inherits has no experience in running the business or no interest in doing so. It can also create disputes among family members or people who feel they are owed some ownership of the business. In the UK, almost 60 percent of adults do not have a valid will, which means that in this scenario, it could lead to a lot of disputes and discrepancies amongst family members.
Is There Tax Involved When Inheriting a Business?
Yes, there are always taxes involved during inheritance and passing on assets. Inheritance Tax may apply if you value the total estate of the individual and this exceeds the current threshold and the standard rate is 40 percent on the value above the allowance.
However, many businesses qualify for Business Relief, which can reduce the tax by 50 percent or even 100 percent, depending on the type of business and how long it has been owned.
Even with relief, there may still be other costs such as professional fees and potential Capital Gains Tax if the business is later sold. It is important for beneficiaries to get proper advice so they understand what they owe and when payments are due. Poor planning can lead to unexpected bills that place strain on both the individual and the business.
How Can You Inherit a Business Smoothly?
A smooth handover of a business when someone dies depends largely on preparation. If the owner kept clear records, named successors, and shared key information, the transition is much easier. It allows for any staff, customers, and suppliers and general business to continue with little disruption.
Without planning, the business may face delays in accessing bank accounts, signing contracts, or being able to make key decisions. In some cases, trading may even pause until legal authority is granted. Statistics suggest that around 30 percent of family businesses fail to make it to the second generation, often due to poor succession planning and unclear leadership.
Can You Inherit a Business If the Person Dies Suddenly?
When someone dies unexpectedly, this is where the biggest challenge emerges because there may be no written instructions, passwords, or clear authority for someone to step in. Employees may feel uncertain, and customers may lose confidence. Cash flow can quickly become an issue if bills cannot be paid or income cannot be accessed.
Temporary managers or directors may need to be appointed while probate is being processed – and whilst this usually is granted within 12 months, complicated probates can last way longer than this. During this period, the value of the business can fall if it is not managed carefully.
Final Thoughts
Inheriting a business is rarely automatic or simple. Legal rules, tax responsibilities, and practical management all impact how smoothly things progress.
By having a clear will and succession plan, it can make a huge difference, both for the family and for the future of the business.
Without planning, the process can be stressful, slow, and costly. Understanding the basics helps families prepare and avoid unnecessary disruption during what is usually a difficult time.
