Are you a shareholder in a private limited company? Do you want to pass your shares on to your loved ones when you die? If so read on, as Prestige Tax and Trust Services explains what happens to your shares when you die.
Private Limited Companies
A limited company is an incorporated business. This means that it has its own legal identity and can own assets or sue in its own right. Ownership of a limited company is divided into equal shares, making a part-owner of a limited company a ‘shareholder.’
There are two types of limited companies; private and public. Private limited companies are limited companies that don’t trade their shares on a stock exchange. Most private limited companies are small to medium sized businesses.
What happens to a shareholder’s business interests when they die?
This means that if you are a part-owner in a private limited company, you own a portion of its shares.
What happens to those shares if you die? Who do they pass to? Can you pass them on to your loved ones?
In Prestige Tax and Trust Services’ Important Information for Business Owners guide we explain that it depends on your circumstances. If you want to pass your shares in a private limited company on to a loved one you need to ask yourself: “Do the provisions of the Articles of Association of your company permit what you wish to do with your share in the company?”
What are the Articles of Association?
The Articles of Association are written rules that determine how a private limited company is run. Writing Articles of Association is a process that must be undertaken whilst setting up a private limited company if you want to incorporate the business with Companies House; a vital step on the road to achieving private limited company status.
Most companies use model Articles of Association for limited companies. This means that you need to check that your company’s Articles of Association to see whether they allow you to pass your shares on to another person.
Pass on your shares in a will
If they do, you can pass your shares on to another person the way you would pass on any asset; through a will. A will is a legal document which allows you to determine who will inherit your assets, money, property etc. if you die. Learn how to write a will if you want to ensure your shares pass to the right beneficiary when you die.
Business wills are complex. They require legal expertise. If you want to pass your shares on in a will, ask Prestige Tax and Trust Services for help. We have 30 years of experience and have recently launched a Business Protection service to ensure that if you’re a shareholder in a private limited company, the right person will be able to inherit your shares if the worst should happen.