As a business owner you would not think twice about insuring your business against loss from fire or theft. Indeed, I suspect that most trading entities have both in place. However, there are other situations that can have serious and very lasting consequences that you should also insure against, such as the future ownership and/or success of your business.
To help you focus on these, and other very serious matters that should be addressed by all business owners, ask yourself the following questions:
— How would your business survive if you, or if one of your key employees, became seriously ill or died suddenly?
— If your business partner died what would happen to his/her share of the business?
—How would you feel about that shareholder’s family joining the business?
— If you died, what would happen to your share of the business?
— Is your spouse or a child in a position to take your place in the business?
— How will your family survive financially if you die, or if you cannot work due to illness or injury? You should always consider getting legal advice online to help you clarifying these matters for you.
— When do you plan to retire?
— What will happen to the business when you retire?
— Can you pass the business on to your children without being ravaged by tax?
Some of the aforementioned potential problems can be avoided with simple straight-forward financial planning, and at a cost that is far from prohibitive. Arranging adequate business protection insurance, in conjunction with gift and/or inheritance planning, is the best way to ensure that funds will end up in the right hands, at the right time. This will safeguard against financial hardship and help ensure the continuity and the survival of the business.
A brief and helpful outline of the business protection plans/services available as part of an overall financial and succession planning review include:
Keyman Insurance — This allows a limited company to plan for the potential financial loss resulting from the death or serious illness of a key employee. For example, will any business loans have to be repaid on the death of an individual?
Shareholder/Partnership Protection — With this type of arrangement, the surviving shareholders of a limited company – or partners in a partnership – can provide funds to purchase the share of a deceased shareholder from their personal representatives. This ensures the surviving shareholders/partners retain control of the business and that the family of the deceased is compensated accordingly .
Income Protection — If you are self-employed or a business owner (limited company) then this type of arrangement provides a regular income which is paid out if you, or an employee, using different systems like the uk payroll process to make sure everyone gets pay in an easy and effective way. This is vital to make sure your standard of living does not suffer if you are unable to work or become ill.
Gift or Inheritance Tax Planning — This allows you, as a business owner, to plan in advance for any tax liability which could arise on the transfer of your business, thus insuring your business won’t have to be sold off to pay the tax debts.
Experienced/Proficient Adviser — To put a clear and robust protection portfolio in place the correct advice is crucial. In many cases the insurance is in place but there may be no supporting agreements. Alternatively, the beneficiaries of the plan may be incorrect. As a result the adviser you use should be experienced and proficient in this very specialised area. ■