How to protect your business against the death of an owner

How to protect your business against the death of an owner

Posted on November 26, 2020 at 3pm

A question we often ask our business owner clients is: what would happen to your business if one of the owners suddenly passed away?

The death of an owner could have far-reaching consequences for your business and, in the worst case, put the future of your company at risk.

What would happen to your business if one of the owners suddenly passed away?

In many situations, the deceased’s family members would inherit the share of the business. Once this has happened, any of the following scenarios could become a reality:

  1. A family member inherits ownership and becomes involved in the business, despite having no prior knowledge or interest in the business.
  2. The family sells their share of the business – if the other business owners do not have the funds this could be to a competitor or other unknown buyer.
  3. The other owners may have to use business funds or their own personal funds, which had been allocated for other purposes, to buy the shares from the family.
  4. The family could force the business to be wound up.

These consequences could be detrimental to the future of the business. So, how do you avoid this?

It goes without saying that no business wants to be under the control of the bank, the deceased’s family, legal representatives, or a third-party purchaser.

Business protection helps to avoid these outcomes by ensuring the ownership of the business remains with the people who built it.

It also gives peace of mind that the family of the owner who dies receive a fair payment for their share.

How does Business Protection work?

In this situation, Shareholder Protection could be a suitable solution. A life insurance policy could be used to provide a lump sum for the surviving business owners, so they buy the deceased’s share of the business from their family, if all parties are in agreement.

Alternatively, a Critical Illness policy can be used to fund the share purchase from an owner who has been diagnosed as critically ill and may never work again.

We understand how hard people work to build their businesses, making many sacrifices along the way to provide for their family. Business protection offers peace of mind for you, your business partners, and the long-term future of your business, while looking after your family financially too.

Read more about the 3 types of protection that business owners should consider, then contact us for a free quote. Email protection@prosserknowles.co.uk or click here to request a call back from one of our advisers.

Stay in touch

If you would like to keep up to date with current industry trends or receive details of our product developments, seminars, events and newsletters, just fill in your details below.

News Feed

The 2020/21 end of the tax year guide

The current tax year will end on 5 April 2020, a date when many allowances and tax breaks will reset. In some...

Why your business owner clients need a shareholders’ agreement

When clients set up a company with family or friends, it’s easy to assume that nothing will go wrong. Since th...

5 easy ways you can be more focused and productive in lockdown

Long winter nights and emotional burnout from the psychological effects of the lockdown mean it’s easy to let...

How has ESG investing coped during the pandemic?

In recent years, environmental issues have dominated headlines as high-profile figures such as David Attenboro...

3 ways that getting financial advice can actually support your mental health

If you have been struggling with your mental health recently, you aren’t alone. According to a study by insura...

Quarter 1 (2021) investment market update

Quarter 1 (2021) investment market update video provided by Jason Broomer, Head of Investment, from Square Mil...

Market & Portfolio Update – Quarter to 31/12/2020

The arrival of a vaccine causes markets to leap The arrival of a vaccine has set a timeline for the pandemic...

Why a financial adviser should be a client’s second port of call when they divorce

Making the decision to end a marriage is a life-changing one and can have serious consequences. However, in th...

5 great ways to boost your mood as the days grow shorter

Winter can be one of the most difficult times of the year for mental health, with dreary weather and long hour...

How the trend of boomerang kids may mean you need to reassess your retirement plans

The trend of ‘boomerang kids’, adult children who move back in with their parents, is on the increase. A recen...

How you can avoid running out of money in retirement

One of the most common questions our clients ask us is: “What are the chances of me running out of money in re...

Inheritance Tax and gifting guide

If your estate could be liable for Inheritance Tax (IHT), gifting is one solution for passing on wealth while...

How potential Capital Gains Tax changes could affect your clients

In the past few months, the Treasury has been under increased strain to mitigate the impact of the coronavirus...

How to protect your business against the death of an owner

A question we often ask our business owner clients is: what would happen to your business if one of the owners...

The 10 best grown-up advent calendars this Christmas

For many people, Christmas truly begins when they open the first door of their advent calendar. With December...