Do You Have The Necessary Protection In Place To Safeguard Your Business?
It seems that business protection is often overlooked. Research conducted by Legal & General across 1,000 members of the British Chamber of Commerce has revealed a significant gap in business protection. Some of the highlights of their findings are below.
Corporate debt
Of the businesses surveyed, 50% had corporate debt, but less than half of these had any life or critical illness policies to cover the money owed.
Shareholder protection
When questioned about shareholder protection to provide funds to buy-out shares in the event of the death or critical illness of a shareholder, less than half had any formal agreement to establish what should happen and only 4% had any shareholder protection in place to provide funds to help buy the shares.
Keyman protection
Less than half of the companies had put in place any protection to address the financial consequences of the death or critical illness of a key person within the company.
What are the risks?
Running your own business may leave you little time to consider your financial future but what would you do if a critical illness, such as heart attack or stroke, forced you to be absent from work?
Failing to address what would happen on the death or critical illness of a business owner or key person, could have significant financial consequences for the business, remaining shareholders and ultimately could result in the failure of the business.
It is important to consider the following points, and if you have not already addressed these issues, or recently reviewed your arrangements, a full review is recommended.
- Could your business continue to exist if you die or are absent for a long period?
- Would you and your family be left with enough to meet day-to-day expenses to maintain your lifestyle?
- What do you want to happen to your shares in the event of your death or inability to continue working?
- Do you need to put any formal agreements in place to meet your requirements?
- Do you need any protection policies to ensure that there are funds available to achieve what you want?
- What about the people who keep your business running and are key to your business success? Do you have an employee whose death or continued absence might seriously impact on the profits of your business?
Next steps
If you have not already reviewed your arrangements Smith & Williamson can help. We provide advice on the financial consequences of the death or serious illness of shareholders and key persons, and can also assist with putting the necessary protection policies in place in a cost effective and tax-efficient way.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
