Running a business requires continuous planning for the future and knowledge of the company’s current financial status whether you trade as a sole trader, in a partnership or as a limited company. It is important to understand the value of key members of your organisation, shareholders and directors, plus how your company’s profit would be affected if one of these members suffered a serious illness or died.
Sole Traders
The following are areas of protection that a sole trader should consider
- Life assurance
- Critical Illness cover
- Healthcare
- Income Protection
- Retirement planning
Also if a sole trader employs any key people then consideration should be made for Key person protection
Partnership Protection
Partners in a business have the same basic needs as a sole trader, however you should also consider the financial implications to the business and yourselves if a partner were to suffer a:
- Sickness or injury
- Critical illness
- Death
On the death of a partner, their share will pass to their estate and technically the partnership will be dissolved.
A partnership agreement can prevent this. It is often in the remaining partners’ best interests for them to buy the deceased’s share. This means that they need a Partnership Assurance Protection plan in place.
Limited Company Protection
Just like a partnership, a Limited companies shareholders need to protect against the death or critical illness of a shareholder. A Shareholder protection plan can provide financial security to joint owners of a business in the event of a shareholder’s death or critical illness.
Life Insurance
Through a predetermined business agreement, in the event of a shareholder’s death the proceeds of a plan can be paid to the remaining shareholders. These funds are used to purchase back the deceased shareholder’s interest in the business from his estate.
This ensures that the shares remain within the company but the deceased shareholders beneficiaries receive the monetary value of those shares.
Critical Illness Protection
Joint business owners can protect the business in the event of a business partner being diagnosed with a critical illness. Shareholder protection can provide a lump sum on diagnosis of a specified critical illness to be paid to the life assured, who in turn gives the business partner their interest in the business. Downton & Ali Associates business consultants can help you evaluate your business needs and create a comprehensive plan to protect the shareholder’s interest.
Key Person Protection
Key person insurance is a means of protecting a business in the event of the loss of a person who makes a significant contribution towards the profitability of a company. There are many ways to evaluate the monetary value but generally a ‘key person’ is determined by the individual’s death resulting in a significant reduction of profits being derived by the employer, during the continuation of business operations, subsequent to the loss. The insurance must be owned by the Business.
Downton & Ali Associates business consultants can help you evaluate your company’s business needs and arrange a comprehensive plan to protect the shareholders and key person/s within your organisation.