One of the biggest risks to any SME is the loss of key personnel – not through resignation but through ill health or death.
Before you stop reading this is not an article about insurance (except the bit at the end) but about the steps that a partnership or smaller limited company should take to ensure that the business can carry on if a partner or director cannot.
This is about the decisions you need to take in advance, and the documents you need to support those decisions.
If you are in a partnership – did you know that in the absence of a partnership agreement the partnership ceases to exist on the death of a partner and therefore cannot continue trading. If you wish your business to endure beyond the death of one of the partners you must have a formal partnership agreement. Your Wills should deal with your business assets separately from the rest of your estate as the taxation treatment can be significantly different for business assets. You should also consider Lasting Power of Attorney so that the business can continue to trade if one of the partners loses the capacity to make decisions.
If you are a director of a limited company you need to get a few more ducks in a row, your Articles of Association need to reflect both your Shareholders Agreement and your Cross Option Agreements and all three of these need to be accurately reflected in your Wills. Once again a Lasting Power of Attorney that deals with your business affairs is well worth having.
So - Partnership, Shareholder, and Cross Option Agreements, Wills, Lasting Power of Attorney - you need some, but not all of these and they need to be drawn up carefully to ensure that you retain the Tax Benefits of having business assets. If you need help and advice just give us a call.
Finally the insurance bit – if you die or are unable to work through ill health how much should you insure for?
The answer is probably more than you think, you should ensure that the company has enough money to buy you out, enough cash to trade through a period of 6 - 12 months without the revenue that you bring into the business, and finally the funds to recruit and train your replacement. For a quote tailored to your business and its unique circumstances give us a call 01778 342291 and we will arrange a meeting.