Protect Your Business
BUSINESS BASICS
As a business owner you are likely aware of many risks in your market place, such as competition, proper marketing plans, and you should be aware of the unforeseen risks with your capital assets, such as fire and theft. However, you must not overlook the risks relating to another key asset, you and your employees.
The Risks involve the loss of key personnel due to death, disability, or critical illness. Can you manage without your key person permanently or even for a short period?
Potential Threats:
- Your business performance my lag due to the absence of an individual.
- You could incur costs of replacing the individual
- Creditors may restrict or withdraw credit
- Suppliers might tighten payment terms.
- Customers may reconsider using the business.
- You may lose other employees concerned with the uncertainty surrounding a key person’s absence.
- Business partners spouses or key shareholders are threatened or forced to take action to protect their interests, and sell their interest or possibly worse, come to work with you!
Solutions:
- Key person disability insurance
- Key person critical illness insurance
- Key person life insurance
- Buy-Sell agreements in place will ensure a smooth transition if one owner/partner is disabled or dies. Funding the agreement is in place with proper insurance coverage.
More on Buy Sell Agreements…
Partnerships and Family businesses can also take advantage of a buy-sell agreement.
Buy Sell Agreements have many uses beyond a sudden death or disability. An agreement can also cover many other situations such as:
- The retirement of an owner
- A non-resolvable dispute between owners.
- Marital breakdown, where an owners spouse has, or may become entitled to an interest in the business
- Personal insolvency of an owner
- Any illegal actions by an owner
Funding options for a buy-sell agreement
- Borrow the funds – may not be possible
- Issue a promissory note – does not get funds into prior owners hands
- Use business earnings – if possible, however will deprive business of needed funds to grow and expand.
- Sell business assets – timing could be wrong and the full value of the asset my not be realized.
- Use life insurance – low cost alternative that provides cash immediately on a death. The premium is for the insurance coverage is low compared to the tax-free proceeds that the business would receive should a death occur.
Business Protection:
Business financial planning is part of a large issue of ongoing financial security for you and your family. We commit to providing you a review and examination of your present and future needs and goals as your financial focus moves from personal through the stages of business growth and finally into succession planning and all the while maintaining a solid Estate Plan.