When the owner of a business dies, probate can be lengthy and complicated as their business assets have to be valued and transferred.
Whether business assets are sold or transferred depends on the way in which the business was owned and operated as well as the wishes of the deceased.
The estate’s executor or administrator will need to obtain a Grant of Probate or Letters of Administration enabling them to deal with the business.
Sole trading and probate
If the deceased was a sole trader, then their finances and assets are simply treated as part of the estate.
Business partnerships and probate
Where the deceased was in a partnership, there would normally be a partnership agreement giving details of each partner’s contributions and liabilities. It should also set out what is to happen in the event of the death of a partner.
The deceased’s estate will be liable for any debts or a share of partnership profits. Separating the estate from the partnership may well be complex and an executor or administrator should take independent legal advice on behalf of the estate.
Companies and probate
Where the deceased owned shares in a company, the company’s Articles of Association will govern how shares can be sold and/or transferred, for example if first refusal must be given to company directors.
The executor or administrator will need to contact the company secretary and arrange for valuation of the deceased’s shareholding.
It may be that the business will need to be sold or shut down. If there are redundancies, there may be liability to make payments.
If it is advantageous to keep the business running while a buyer is sought, then someone needs to be appointed to do that. If there are other owners or partners, then liaising with them will be essential.
As well as dealing with probate, the executor or administrator may also find themselves having to deal with questions of employment law, company law, property law and insolvency.
For this reason, it is highly recommended that when the deceased owned a business, professional legal help is sought.
If errors are made during the administration of an estate, executors or administrators may be held personally liable.