When You're In Business You Need To Protect Your Share
We don't like to think about ill health, but ...
When you are setting up a business, there are many things to think about, in particular, how you are going to support yourself and your family until profits start to flow ...
When you're in business with others, their health is just as important as your own!
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It is highly stressful, yet it can also be an enjoyable time, looking forward to the opportunities that your ideas are opening up and watching your customer base grow.
"The last thing on your mind will be your health or the wellbeing of your business partners!"
It might seem rather morbid to think about, however, if you were to lose the contributions of an important business partner to ill health (or worse, their death), the impact on the workings of a small business could be enormous.
Not only would you lose the companionship of a business partner and possibly a good friend, you would also lose their valuable expertise. Moreover, you could potentially lose a share of your company to spouses or beneficiaries who are interested in its value, but have little or no concern over your vision for the future.
The answer for every business owner, whether that's an office-based startup or a team of collaborating tradespeople on a building site is to think seriously about setting up some level of shareholder or partnership protection.
This could help to safeguard you against these pitfalls by enabling existing company directors to purchase business shares from a fellow director's family if they should die or suffer a critical illness that prevents them from working.
It is available to individuals in either a limited company or a partnership and, combined with a good shareholder agreement, can help to ensure that you and your partners retain control of your firm should the worst happen.
There are several ways to go about taking out this insurance. Each principal could take out a policy on each of the others; this is a popular approach when there are just two partners involved in a business.
However, this can get complicated when there are three or more partners; it can also seem inequitable if the age difference between partners is significant because the cost of insurance for older people will be much higher.
For three or more partners, therefore, the more common approach is for each partner to write a policy on their own life and place it in trust for the benefit of the company itself.
"And if the worst happens?"
Well, that means the remaining shareholders can then use the funds received by the company to purchase those shares and redistribute them amongst themselves.
If you'd like to find out more, get in touch on 01525 211102 or click here to visit our website to find out other ways we can help you.
Until next time ...
Will has extensive experience in pensions and investments having previously worked for two of the UK’s largest insurers. The experience and knowledge gained helps when assisting clients build a Lifestyle Financial Plan. He advises clients from SME business owners busy building their future, to those who are financially independent and enjoying the fruits of their labour.
Will is qualified to Diploma Status with the Personal Finance Society and also holds the G60 Pension specialist qualification. He is soon to take the Institute of Financial Planning’s ‘Certified Financial Planning’ qualification.
Outside work, he enjoys cycling, a bit of golf, dog walking and supporting the Cardiff Blues and Welsh Rugby team.
Accalon Associates Ltd is Independent Financial Adviser firm authorised and regulated by the Financial Conduct Authority.