How do I protect the family business?
Protecting a family business, from the curve balls which life throws at us, is a priority, especially in an area such as Cumbria which has many family owned businesses. Whether the business is a family farm, B&B or a service focused business, protecting its future for generations to come should be taken seriously. Whilst your mind is usually focused on the day to day running of the business, you should take time to think about the future. What happens to the business if one of the Directors/Owners passes away? What will happen to the business following retirement? What happens if one of the Directors is going through divorce – is the business at risk?
The Government currently has favourable inheritance tax rules governing family businesses. You may wish to pass on the business to the next generation but, at the same time, you may wish to retain a controlling stake in the business or to protect those assets from the potential damage caused by divorce.
You could consider placing some or all of the business in trust. Trusts are nothing new and have been used for many years in or order to control the destination of assets, to separate the management and beneficial enjoyment of the asset or to protect them from external factors. Trusts can also work to mitigate tax liabilities.
Our family team can also assist in dealing with the complex financial issues which may arise where business assets form part of the financial issues arising from relationship breakdowns. Many people do not realise that in many cases a family business will constitute a matrimonial asset and the Court will take into the account the way in which the business was purchased or funded, and may order shares in a business to be transferred to a spouse who previously had no interest in the business. As a business owner, you might consider pre-empting any disputes arising out a divorce and require co-owners to enter into Pre-nuptial or Post-nuptial Agreements in order to prevent any dispute about the business assets occurring.
Many matters can be resolved at the outset by producing a Shareholders’ Agreement or Partnership Agreement. In all cases, when one party seeks to remove themselves from the business entirely then a Settlement Agreement will be necessary.
At Arnold Greenwood our experts can assist you in preparing for these eventualities. The message is simple, seek advice and our expert teams of Commercial, Employment, Trusts & Estates and Family solicitors will guide you through the process.
To contact us, please call
01539 720049, or complete your details in the form below.