Business Protection is the first thing we will discuss with any business owner when they come to meet with us.
A couple of clients were recently referred to me from 2 of our professional partners, in both cases they are business owners running successful businesses.
In both instances they are doing very well, making healthy profits and looking to the next stage of their businesses.
(Before I go on I realise that this may not apply to a section of our clients who are already retired or have sold their businesses so feel free to stop reading here. However it may apply to friends or family so I would recommend reading on).
They were referred to me to look at extract profits efficiently from their businesses, begin their retirement planning and look at other investment options.
While this is perfectly reasonable, my job is to look at the bigger picture for any gaps in the client’s plans.
I raised the issue of business protection, not the type of “protection” one might find in a gangster movie but simple old fashioned life assurance, for starters.
While neither business had any arrangements in place, their needs were quite different but equally critical.
The first business has 2 directors with different % shareholdings, both of whom would want to provide for their family, but who would also want the business protected in the event of the others death.
We have heard plenty of anecdotal evidence from accountants and lawyers where the executors of the director’s estates have had to force the sale of the business because there was no business protection in place and the directors were unable to raise the finance to buy the shares.
There have been other cases where where the business has had to be liquidated.
With a simple Term Assurance policy in place as Business Protection for each director, the right trusts and legal agreements in place, both the deceased family and the business will be protected.
In the second case there is only one business principle (at the moment). You might wonder in those circumstances why bother, as his family will eventually receive the proceeds of the sale of the business in the event of his death.
In theory you would be correct, however, in the event of the death of the business principal and no one in place to run the business, do you think any sale will be at full value, easy or quick?
The other factor we have to consider is the impact of that person’s death on the family, you would imagine the last thing the family would want to deal with in those circumstances would be running or selling a business.
Putting in place a simple term assurance policy, written in trust, for the family would ensure the full value is paid to the beneficiaries immediately, in the event of death.
The business sale and everything that goes with it, can then be left to be sorted out by lawyers and accountants in due course.
Please feel free to share this with any friends or clients you feel may benefit from the information above.
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