Building a successful business can take years. Yet many business owners spend far more time planning the future of their company than planning what should happen to their interest in it after they die.
If you own a business and die without a valid will, you do not get to decide who inherits your estate. Instead, the intestacy rules determine who is entitled to it.
For a business owner, that can create consequences not only for the family but also for fellow shareholders, business partners, employees and the future of the company.
What does dying intestate mean?
A person who dies without leaving a valid will is said to have died “intestate”.
In England and Wales, their estate is then distributed according to statutory intestacy rules.
These rules determine which relatives inherit. They do not take account of informal promises or simply distribute assets according to what family members believe the deceased would have wanted.
That distinction can be particularly important where the estate includes shares in a company or another valuable business interest.
Does your spouse automatically inherit everything?
Not necessarily.
If a person dies leaving a spouse or civil partner but no children or other descendants, the spouse or civil partner will generally inherit the whole intestate estate.
Where there are children or other descendants, the position is different.
Under the rules currently applying in England and Wales, a surviving spouse or civil partner receives the deceased’s personal chattels, the statutory legacy, currently £322,000, and half of the remaining estate. The other half of the residue passes to the deceased’s children or their descendants under the statutory rules.
This can produce an outcome very different from what a business owner intended.
Unmarried partners are in a particularly important position. A cohabiting partner does not automatically inherit under the intestacy rules simply because the couple lived together for many years.
What happens to shares in a company?
Company shares are assets and can form part of a deceased shareholder’s estate.
But inheritance is only part of the picture.
The company’s articles of association and any shareholders’ agreement should also be examined. These documents may contain provisions dealing with the death of a shareholder, transfers of shares, valuation procedures or arrangements allowing other shareholders to purchase the deceased’s interest.
Without coordinated estate and business planning, the result can be uncertainty at precisely the time when a business needs stability.
For example, beneficiaries under the intestacy rules may ultimately be entitled to value from an interest in the business even though they have never been involved in running it.
A properly drafted will can form part of a wider succession plan designed around the business and the owner’s family circumstances.
What about partnerships?
Business owners operating in partnership should also consider what happens on death.
The answer will depend significantly on the partnership arrangements in place. A written partnership agreement may contain detailed provisions dealing with death, succession, valuation and payments to an estate.
The will and partnership agreement should therefore be considered together.
The same principle applies to shareholders’ agreements and other business succession arrangements. Creating a will without reviewing the business documentation can leave inconsistencies that later cause disputes.
Who deals with the estate if there is no will?
A will normally appoints executors to administer the estate.
Where there is no valid will, an eligible person will generally need to apply for authority to administer the estate. This can add another layer of uncertainty at a difficult time.
For a business owner, choosing appropriate executors can be especially important. The estate may contain company shares, partnership interests, commercial property, business debts and other assets requiring informed decisions.
A will gives the owner an opportunity to select the people who will take responsibility for administering those assets.
What about Inheritance Tax and Business Relief?
Tax planning is another important reason for business owners to review their wills.
Inheritance Tax is complex and the tax treatment of business assets depends on the circumstances. Business Relief can reduce the taxable value of certain qualifying business property.
Significant changes took effect on 6 April 2026.
For deaths on or after that date, qualifying business and agricultural property can receive 100% relief up to a combined allowance of £2.5 million. Qualifying property above the available allowance generally receives 50% relief. An unused allowance may also be transferable from a deceased spouse or civil partner, potentially increasing the available 100% relief allowance to £5 million.
Not every business or business asset qualifies, and conditions apply. For example, ownership requirements and the nature of the business can affect eligibility.
The ordinary Inheritance Tax nil-rate band is currently £325,000, with separate rules governing the residence nil-rate band.
Business owners should therefore avoid assuming that their company or business interest will automatically pass free of Inheritance Tax.
A will is part of business planning
For an owner-managed business, succession planning should not be separated from personal estate planning.
A coordinated plan may involve reviewing:
- your will;
- company articles;
- shareholders’ or partnership agreements;
- the ownership and value of business interests;
- insurance arrangements;
- potential Inheritance Tax exposure; and
- who should control or benefit from the business after your death.
The objective is not simply to decide who inherits. It is to reduce uncertainty and give the business the best possible framework for dealing with a change in ownership.
Speak to Penerley Solicitors
If you own a business, making a will can be an important part of protecting both your family and the enterprise you have built.
Penerley Solicitors can help business owners prepare or review wills, consider succession arrangements and ensure personal estate planning is considered alongside relevant business documentation.
Whether you are making your first will or reviewing an existing will after changes to your business or family circumstances, contact Penerley Solicitors to discuss your estate and succession planning.
This article provides general information about the law in England and Wales and does not constitute legal or tax advice. Tax rules and individual circumstances can change, so specific advice should be obtained.
