Have you thought about who is going to fill your shoes?

Have you thought about who is going to fill your shoes?

Here is a question every business owner or entrepreneur needs to consider. What would happen to your business if you or one of your key employees died suddenly or could no longer work because of an accident or illness.
For many businesses the loss of an owner or a key employee can spell disaster. This is why it is vital for business owners to have a strategy in place to deal with these situations. It is a very real concern for business owners and their families throughout Ireland who are facing this issue every day.
As a business owner, you protect your property, your vehicles and equipment. Have you considered though protecting yourself and your key personnel.
Have you calculated the potential financial loss to your business and family if you or one of your key staff died prematurely.
Would any of your family want to step into the business assuming they are old enough or would they sell the business.
Would you have the funds available to buy your co-owner’s share of the business from their family. These are some of the scenarios you should plan for and although human life and health is priceless you do need to put some monetary values in your plan.
Business Protection is an effective solution that can ensure there is a capital lump sum available to buy a deceased business partner’s share or help offset the financial impact of a key employee’s death.
Having the means to buy a deceased partner’s share allows the remaining partners to retain full control of running of the business and ensure the deceased persons family are properly looked after.
People will put other forms of financial protection in place for their business such as insuring their premises, machinery or even their debt. Because these protections in the main are mandatory we cover them automatically.
However, they don't protect the greatest asset in any business which are the people who work in it.
If there are 2 shareholders in a business there is a 24% likelihood of at least one shareholder dying before aged 65.
This increases to 34% if there are 3 shareholders and 43% if there are 4 shareholders (Source CSO). It is concerning that so many businesses owners can be busy planning for retirement but overlooking this potential financial risk.
There are a range of business protection solutions available to help businesses survive the death or indeed serious illness of key personnel, that would result in a financial loss for a business.
These solutions provide a number of benefits for both the businesses and the people;
They offer peace of mind to the directors or partners, as they remove the financial worries associated with the death or serious illness of themselves or a colleague.
They remove the need for businesses or surviving partners to borrow money to buy out their partner’s share of the business.
They remove the need for a surviving family member to take the deceased’s place in the business.
Having a clear plan in place can make life a lot easier for families already dealing with the trauma of a sudden death or illness.
There are a number of different types of business protection solutions available to suit the different types of business structures.

Co-director’s insurance
This is where each director insures themselves against the death of their partner. This enables them to buy out the partner’s shares on death or serious illness. As an alternative, the insurance can be effected by the company itself. The parameters are agreed in advance so both parties and their families should be aware of the arrangements.

Partnership insurance
Similar to the above, a partnership takes out insurance, protecting itself against the death or serious illness of an individual partner, enabling them to compensate the deceased partner’s estate for their share of the partnership.

Key person insurance
This helps a business to minimise the impact of the death or serious illness of a key employee. The insurance can be used to quickly attract a replacement employee or indeed to pay off loans of the company that may have been guaranteed by the deceased.
The key to finding the right solution is getting the right advice and getting it early.
A good start would be to document yourself, who the key people are in your organisation and the potential impact to the business if anything happened them. Once you have that part done you can start costing it and deciding on a level that makes sense for you and your business.
If protecting the future of your business is a concern to you, always seek independent financial advice before committing to any long-term plans.

Conor Harte is a Financial Planner with Wealthwise Financial Planning who are based in Block C, Hartley Business Park, Carrick-on-Shannon, www.wealthwise.ie All details and views contained within this article are for informational purposes only and does not constitute advice. Wealthwise Financial Planning makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use. Wealthwise Financial Ltd T/A Wealthwise Financial Planning is Regulated by the central Bank of Ireland.#CI66141

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