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 or click here to request a call back from one of our advisers.

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