Maybe they don’t fully understand the consequences to themselves, their own family or their employees or maybe they don’t know that they can put plans in place to ensure they can do a lot more than just keep the business trading, should the worst happen.
A better name for a Business Protection Plan could be your Business Financial Back-Up Plan. If you have got this in place should the owner of the business, a director or other key person become too ill to work or even die then the financial livelihood of the business, employees and shareholders can be protected.
A business protection plan would usually ensure that insurances are put in place to enable your business to carry on trading profitably whilst you replace key people, protect your corporate debt and ensure that the shares of the business do not transfer to a shareholders’ family or estate should they become incapacitated or die.
If you are the business owner and you died, your shares in the business would more than likely pass to your husband or wife as part of your estate, meaning that at the worst possible time they would be responsible for keeping the business running.
If shareholder protection was in place other shareholders, who are probably better placed to run the business, would have the funds available to buy your shares.
On the flip-side if your business partner is a shareholder and they died, you could find yourself having to share the running of the business and the profits with his partner or estate. With shareholder protection in place you would have the funds to buy the shares.
This is just one example of the unexpected consequences of not having your business financial back-up plan in place.
The prudent business owner should at least have a discussion with their financial adviser about business protection planning including key person cover, shareholder protection, business loan protection and relevant life insurance.
