Who will fill your shoes in business? Everything to prepare for the future

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Q. Have you considered the impact your death, the death of a key employee or business partner would have on your business?

. Business owners and their families across Ireland face this problem every day. Some, however, are much better prepared than others.

As a contractor, you protect your property, vehicles and equipment. But have you thought about what would happen to your business if you died prematurely and the financial impact it could have on your family and your business? Would your family stay in the business or sell it?

You may also need to consider the impact on your business of the death of a key employee or business partner. Would you have the funds available to purchase your co-owner’s share of the business from his family? Would the company be able to bear the financial loss in the event of the death of a key employee?

We can sometimes neglect to protect our most valuable business assets: the men and women whose talent, experience and judgment contribute substantially to the financial health of the organization. These key personnel represent the heart of every business, especially small businesses or family businesses. A prolonged absence due to serious illness or even death can lead to heavy losses or even closure.

Who are your key people?

A key person is anyone on whom the business depends for its continued success, relies on their specialist skills, reputation and contacts, and whose death would have serious consequences for your business.

Insurance to protect your business

Many companies will not have employees with the same knowledge, experience, judgment and reputation as the deceased employee. Sourcing an external candidate and in particular, the recruitment and training process can be slow and expensive.

Insurance to protect your profits

The effect of losing a key staff member goes well beyond the cost of their salaries and the cost of replacing them. Since they are at the heart of your business, their loss will affect the bottom line. You can also insure yourself against lost profits!

Protect shareholders or partners

We are talking here about insurance to protect interests in the event of long-term illness or death. Families may want to sell their stake in the business, but the remaining members of the business may not have the means to buy but do not want those stakes to be held by newcomers.

Those who provide personal guarantees

When a company takes out a loan or raises funds, the lender is very likely to require a personal guarantee or charge on their personal property. This particularly applies to small and new businesses.

So what happens if these guarantors become seriously ill or die? Lenders may well be able to apply for the loan. What happens then? Insurance can be put in place to repay the loan and release the business and the family of the guarantor.

This insurance is essential. It cannot replace people, but it can provide cash to save time and cover the costs of temporary staff, recruitment or loss of profits.

A financial broker has the expertise to help you identify your business protection needs, whether you are a sole trader, a general partnership or a limited liability company. Business Protection is an effective solution that can ensure the availability of lump sum capital to buy out the deceased business partner’s share and/or help offset the financial impact of the death of a key employee. Having the means to buy a deceased partner’s share allows the remaining partners to retain full management control of the business.

You can’t predict the future, but you can plan for it.

By Philip Cullen of Southeast Mortgages & Financial Services

This article is intended to provide information, not advice. Always do your own research and/or seek advice from a financial broker before acting on anything contained in this article.

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