In 2014, it is estimated that there was 550,000 new businesses started in the UK (nearly a record level!) and in total, over 5 million registered in the UK private sector, employing 25 million individuals.
The majority of these employ 10 people or less, meaning that most of the companies in the UK are Small/Medium enterprises (SMEs).
Starting a company is both an exciting prospect and for most, the pinnacle of an individual’s working career, with many hours of hard work and commitment put into making hopefully, a very successful and profitable business.
However, many company owners are unaware of the consequences for their business should anything happen to them, such as on death or even suffering a serious illness. These events could have serious impact on the day to day running of the business raising questions, such as:
• How will this impact other Directors/ Shareholders?
• What will happen to the profits?
• Will the company survive?
• How will the deceased’s family be impacted?
• Who will take over ownership of the business?
Protecting a business from the prospect of losing the key individual should be high on the agenda for anyone, however, in reality, less than 50% of business owners have any form of financial protection in place.
There are 4 main types of business protection to consider, each for differing circumstances:
Loan Protection: In the early years of a business, it is highly likely that loans will be required to help get the company ‘up and running’. However, how would this debt be repaid on death of the business owner? Would the deceased’s family or other shareholders then be responsible for this debt?
Shareholder Protection: For multiple shareholders, what happens on death of one of these individuals? Their shareholding is likely to pass to the deceased’s family who will then own part of that business? Is this a viable option for the business or, indeed, the family?
Key Person Protection: Does the company have an employee who is absolutely paramount to the day to day running of the business? How will the business cope if anything were to happen to them?
Relevant Life Protection: Family protection for a key individual, i.e. death-in-service cover, with premiums paid tax efficiently through the company as a business expense.
Why not give your business the best possible chance for success and longevity, by insuring the most relevant of the key areas highlighted above. Kellands help many business owners to insure the best possible outcome for you. Call and talk through your options.
Ian Boasman. Kellands. Independent Financial Planner.