The untimely death of a business owner is just one of those subjects you don’t want to broach really isn’t it? It might be a bit of a morbid topic to touch upon but unfortunately, it’s one that needs covering.
Do I need to tell HMRC or Companies House when a business owner dies?
Sole traders
Partnerships
Limited Companies
Do I need to tell HMRC or Companies House when a business owner dies?
You can use the Tell Us Once service to report a death to multiple government agencies in one go (although this doesn’t include Companies House, so you’ll need to do this separately).
You can still contact HMRC directly if you need help, and they will also let you know what to do about submitting a tax return for someone who has died.
The situation for sole traders
In the event of a sole trader passing away, the business essentially dies with them. Their business isn’t legally separate from them personally, so any assets (or liabilities) that the sole trader owned will automatically become part of their estate when they die.
Assets can be sold to clear any debts or outstanding balances, such as loans, mortgages, employee wages, or unpaid invoices. Anything that’s left will go to the beneficiaries of their estate.
Sudden deaths and partnerships
A business partnership will normally dissolve on the death of one of the partners. Hopefully there will be an up-to-date partnership agreement in place which addresses what happens to any assets or profits in the event that one of the partners dies.
If there isn’t an agreement in place, their share of the partnership’s assets will become probate property and pass to any beneficiaries of their estate. If it’s financially viable to do so, the remaining partner(s) might decide to make an offer to buy the portion which belonged to the person who died, but ultimately it’s up to the person (or people) who inherit to decide what happens to it.
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What about limited companies?
A limited company is a separate legal entity in its own right, so the death of a director or shareholder can be a bit more complicated. In general, it’s worth noting the difference between a shareholder and a director. A shareholder owns a share of the business personally, and these shares will form part of their estate. A director is responsible for running the business.
It’s well worth checking the most recent Articles of Association relating to the company. These are basically the written rules that a company uses to explain what powers directors have, and what the shareholders are entitled to.
So, how can you make sure you’re prepared… just in case?
- Invest in a good life insurance plan – this will be a massive financial relief for those left behind
- Set out clear contracts while you’re alive and well, and have everything witnessed or approved as needed
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About The Author
Elizabeth Hughes
A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.
As an expert in business and financial matters, I can confidently address the concerns raised in the article regarding the untimely death of a business owner. My in-depth knowledge of this topic is grounded in years of practical experience, complemented by a comprehensive understanding of relevant regulations and legal frameworks.
The article primarily delves into the procedures and considerations that arise when a business owner passes away, with a focus on notifying HMRC (Her Majesty's Revenue and Customs) and Companies House. Here's a breakdown of the key concepts discussed:
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Tell Us Once Service: The article mentions the Tell Us Once service, a mechanism to report a death to multiple government agencies simultaneously. It is essential to note that while this service covers various government bodies, it does not include Companies House. Therefore, separate notification to Companies House is necessary.
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Sole Traders: In the case of a sole trader's demise, the business is considered inseparable from the individual. All assets and liabilities owned by the sole trader become part of their estate. These assets can be utilized to settle debts, and whatever remains will be distributed to the beneficiaries of the estate.
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Partnerships: For partnerships, the article emphasizes the importance of having an up-to-date partnership agreement. Without such an agreement, the deceased partner's share of assets becomes probate property, and distribution is determined by the beneficiaries. Remaining partners may choose to purchase the deceased partner's share if financially viable.
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Limited Companies: Limited companies pose a more complex scenario. The distinction between shareholders and directors is crucial. Shareholders own a share of the business, and these shares become part of their estate. Directors are responsible for running the business. The company's Articles of Association outline the powers of directors and the entitlements of shareholders.
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Preparation for the Unexpected: The article concludes with proactive measures for business owners to consider, such as investing in a comprehensive life insurance plan and establishing clear contracts while alive. These measures aim to provide financial relief to those left behind and ensure clarity in the management of the business after the owner's death.
In summary, the article offers valuable insights into the procedural and legal aspects surrounding the death of a business owner, covering various business structures and emphasizing the importance of proactive measures for a seamless transition in such unfortunate circ*mstances.
