What happens to a business when the owner dies depends almost entirely on its legal structure. A sole trader business has no separate legal existence, so it forms part of the owner's estate and passes under their will or the intestacy rules. A limited company is a separate legal person, so it continues after death while the owner's shares pass on.
A partnership sits between the two: it may dissolve automatically on a partner's death unless a partnership agreement says otherwise. Alongside the structure, three things shape what happens next: whether there is a valid will, whether the business has a succession plan, and how any inheritance tax is dealt with. This guide walks through each structure, who can run the business before probate, and how the tax rules apply in England and Wales. Figures are current as at August 2026 and are subject to change.
It comes down to the business structure
The single most important question is how the business is owned. The table below sets out the general position in England and Wales, and the sections that follow explain each in turn.
| Structure | Separate legal entity? | What generally happens on death |
|---|---|---|
| Sole trader | No | The business assets form part of the estate and pass under the will or intestacy. Trading usually stops until the estate is dealt with. |
| Partnership | No (an ordinary partnership) | May dissolve automatically unless the partnership agreement provides for continuation. |
| Limited company | Yes | The company continues. The deceased's shares pass under the will or intestacy; the articles and any shareholders' agreement govern transfer. |
| Limited liability partnership (LLP) | Yes | The LLP continues, though the deceased ceases to be a member; the LLP agreement sets out what happens to their interest. |
General position under the Partnership Act 1890 and the Companies Act 2006, as at August 2026. Every business is different and its own documents may change this.
If the owner was a sole trader
A sole trader and their business are the same legal person, so there is nothing to survive the owner. The business assets, such as stock, equipment, goodwill, cash and any premises, become part of the estate. They pass to whoever inherits under the will, or under the rules of intestacy if there is no valid will (gov.uk, as at August 2026, subject to change). Trading normally pauses on death, and the personal representatives decide whether to sell the business as a going concern, pass it to a beneficiary, or wind it down. Business debts do not disappear; they are paid from the estate before anyone inherits, though creditors cannot pursue the family personally beyond the estate's assets. A clear will that names who should receive the business can make the difference between a smooth handover and a forced sale.
If the owner was in a partnership
In an ordinary partnership with two partners, the death of one partner dissolves the whole partnership unless the partners have agreed otherwise, under the Partnership Act 1890, section 33 (as at August 2026). This can be disruptive: the business may have to stop trading, settle its affairs and distribute what is left. A well-drafted partnership agreement usually prevents this by allowing the surviving partners to continue and to buy out the deceased partner's share, often funded by life insurance held under a cross-option arrangement. The value of that share then passes into the deceased partner's estate. Where no agreement exists, the deceased's estate is generally entitled to their capital and a share of profits, but the outcome is far less certain.
If the owner ran a limited company
A limited company is a separate legal entity, so it does not die with its owner. It continues to exist, employ staff and hold contracts. What passes on is the deceased's shareholding, which forms part of the estate and moves under the will or intestacy. Two documents then control how those shares are dealt with: the company's articles of association and any shareholders' agreement. These may give the other shareholders a right of first refusal, or set out how the shares are valued and transferred.
A practical issue arises where the deceased was the sole director and sole shareholder. Until the shares are formally transmitted to the personal representatives and a new director is appointed, the company can be left unable to act, which may freeze its bank accounts and payments. Model articles allow the personal representatives of a deceased sole shareholder to appoint a director, but older or bespoke articles do not always provide for this. Checking the articles in advance is one of the more useful steps an owner-manager can take.
Who can run the business before probate?
Authority to deal with a deceased person's assets, including a business, generally comes from the grant of probate (where there is a will) or letters of administration (where there is not). Until that grant is issued, banks and other institutions often restrict access to accounts. The personal representatives named in the will can begin acting straight away in principle, but many third parties will want to see the grant first. For a limited company the position is different again, because the company, not the estate, owns the business; the bottleneck is usually appointing someone with authority to act for the company.
You can read more about how this process works in our guide to what probate is and how it works. Applying for probate carries a court fee of £526 for estates over £5,000, with no fee for estates of £5,000 or less (gov.uk, as at August 2026, subject to change).
| Step | What it involves | Typical cost (August 2026) |
|---|---|---|
| Grant of probate | Court application confirming the personal representatives' authority | £526 (estates over £5,000) |
| Extra sealed copies | Copies of the grant for banks, Land Registry and others | £2 per copy ordered with the application |
| Inheritance tax | Reported and paid before or during administration | Depends on the estate |
Fees from gov.uk/applying-for-probate/fees, as at August 2026, subject to change.
Inheritance tax on a business
A business or a shareholding is an asset like any other for inheritance tax, so its value is added to the estate. The standard rate is 40% on the part of an estate above the available tax-free thresholds, reduced to 36% where at least 10% of the net estate passes to charity (gov.uk, as at August 2026, subject to change). The nil-rate band is £325,000 and the residence nil-rate band is up to £175,000, both frozen until 5 April 2031 (gov.uk Budget 2025, as at August 2026, subject to change).
Business property relief can significantly reduce or remove the tax on qualifying business assets. From 6 April 2026, relief is given at 100% on the first £2,500,000 of combined qualifying business and agricultural property per person, and at 50% above that. The £2.5m allowance is transferable between spouses and civil partners, giving up to £5,000,000 per couple (gov.uk, as at August 2026, subject to change). Not every business qualifies; broadly, trading businesses can, while those mainly holding investments generally cannot. Where tax is due on a business or unlisted shares, it can often be paid in equal annual instalments over 10 years, with the first instalment due at the end of the sixth month after death (gov.uk, as at August 2026, subject to change). Our inheritance tax guide covers the thresholds and reliefs in more detail.
A further change affects owners who hold wealth in a pension. From 6 April 2027, most unused pension funds and death benefits are due to be brought within the value of the estate for inheritance tax (gov.uk, announced Autumn Budget 2024, as at August 2026, subject to change).
Planning ahead shapes what happens to the business
What happens to a business on death is far more predictable when the owner has planned for it. A will can name who inherits the business and can include specific gifts of shares. A partnership or shareholders' agreement can set out how a departing owner's interest is bought and valued. Cross-option agreements, often backed by life insurance, can give the survivors both the right and the funds to buy the deceased's share. And because incapacity can strike before death, a business lasting power of attorney for property and financial affairs lets a trusted person manage business decisions if the owner loses mental capacity. An LPA is registered with the Office of the Public Guardian for a fee of £92 per LPA (gov.uk, as at August 2026, subject to change). Bringing these together is the core of good estate planning for business owners.
Scotland and Northern Ireland
This guide describes the law of England and Wales. Scotland has its own succession law, applies legal rights that can entitle a spouse and children to a fixed share of the estate, and uses confirmation rather than a grant of probate to give executors authority. Northern Ireland has a separate system that is broadly similar to England and Wales but administered through its own courts. Company law under the Companies Act 2006 applies across the whole of the United Kingdom, so the position on limited companies is largely consistent, while the estate and succession side differs. If a business or its owner has connections in more than one jurisdiction, it can be worth taking advice in each.
Frequently asked questions
What happens to a sole trader business when the owner dies?
Because a sole trader and their business are the same legal person, the business does not continue automatically. Its assets form part of the estate and pass under the will, or under the intestacy rules if there is no will (gov.uk, as at August 2026, subject to change). The personal representatives decide whether to sell the business, pass it to a beneficiary, or close it, after any debts are paid from the estate.
Does a limited company continue after the owner dies?
Yes. A limited company is a separate legal entity, so it continues to exist after a shareholder or director dies. The deceased's shares pass into their estate and are dealt with under the will and the company's articles of association. A practical risk arises where the deceased was the only director and shareholder, as the company may be unable to act until the estate is administered.
Who can run a business after the owner dies before probate?
The personal representatives named in the will can begin acting, but banks and others often ask to see the grant of probate or letters of administration first. Applying for probate costs £526 for estates over £5,000 (gov.uk, as at August 2026, subject to change). For a limited company, authority usually comes from appointing a director, not from the estate itself.
Do you pay inheritance tax on a business you inherit?
A business is an asset for inheritance tax, so its value is added to the estate, which is taxed at 40% above the available thresholds (gov.uk, as at August 2026, subject to change). Business property relief can reduce this, giving 100% relief on the first £2,500,000 of qualifying business and agricultural property per person from 6 April 2026, and 50% above that (gov.uk, as at August 2026, subject to change).
What happens to business debts when the owner dies?
Business debts do not disappear. For a sole trader, debts are paid from the estate before anyone inherits, and creditors can look to the estate's assets but not to family members personally beyond it. For a limited company, the debts belong to the company, which continues to be responsible for them. The position depends on the structure and the terms of any personal guarantees.
Can a business bank account be frozen when the owner dies?
A sole trader's business account is generally frozen on death until the personal representatives obtain authority, because it is a personal account of the deceased. A company account belongs to the company and is not automatically frozen, though banks may restrict it if there is no one authorised to give instructions. Reviewing signatories and the company's articles in advance can reduce this risk.