Why you need a Partnership Agreement and a Will.
Natalie Biggin – Partner
A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.
A Will is a legally binding document that allows you to appoint executors and decide who your estate will pass to when you pass away.
Why would I need both?
A written Partnership agreement evidences to HMRC that you are a trading business and this will assist your Executors to successfully apply for Business Property Relief (‘BPR’) – a tax relief on the value of your business assets.
Where assets belong to the Partnership the relief is 100% and if the asset such is owned by the Business Owner personally but used in the business, the relief is only 50%. A written partnership agreement confirms to HMRC this distinction.
Assets outside of the partnership are then governed by the terms of your Will.
In addition the partnership agreement will state that a partnership share is to pass automatically to another member of the partnership e.g. a spouse, or a person nominated by the “outgoing” partner but failing that, and more commonly, the continuing partners will have the right to purchase the share of an outgoing partner in the proportions of their partnership shares. In that case the sum received for that partnership share will fall to be dealt with under the Will.
Once a written partnership is in place the Will shall also ensure that:
- Executors are appointed
- Guardians are appointed for minors
- Specific gifts can be made
- Your loved ones are provided for
For further details you can contact our Wills & Probate department here.