Protecting your Business
In every business there are key personnel
without whom the business would suffer or, at worst, not
survive at all.
For this reason several levels of Key-Man
Insurance are worth considering to ensure that your business
is not damaged by the temporary or permanent loss of an invaluable
member of staff.
Critical Illness cover is recommended to
pay a lump sum to the business should a key director or employee
be diagnosed with a life-threatening illness to give the
company the opportunity to find a replacement or to compensate
for the financial losses that might be incurred.
PHI can also be taken out to cover the
business for short-term loss during periods of hospitalisation,
but this is less common as these policies pay weekly or monthly
amounts after a deferred period, rather than a lump sum.
Straightforward life assurance such as
Level Term should definitely be considered for all key personnel,
the loss of whom would seriously damage the business.
In all cases, of course, the company pays
the premium and is the beneficiary.
Self Employed persons will need to make their own pension
arrangements or they will not have a pension when they
retire.
Many self-employed business people assume
that their business can be sold when they wish to retire
and that this will produce a lump sum to provide their income
in retirement. However, for most small firms, this simply
will not happen.
The business may be either unsaleable because
its revenue is reliant on a single person's skills or the
sum produced will be much lower than expected. Those relying
on this occurrence should be ruthlessly realistic in their
expectations because they may well find that it is too late
to make alternative arrangements nearer to retirement.
Pension investments can be made on a regular
monthly or annual basis or as individual single variable
premiums.
If you have not yet started any pension
planning then, as a Sole Trader or Partner, you will probably
be best advised to look at a Personal Pension Plan.
Owners of businesses have a lot of scope to invest in pensions,
and it is very important that they use that fund to support
their business.
For example, a pension fund can invest
in property, and then rent it out to your own company, becoming
your own highly tax-efficient landlord.
This means that, not only is your rent
still a tax deductible expense, but also that it goes straight
into your pension fund, eventually to be returned to you
as a pension. Your pension fund can also act as a private
bank, lending money to the company for expansion and other
development plans.
How many smaller businesses close down or go out of business
at retirement, simply because the Key Man did not plan
ahead?
Planned succession is the only way ahead,
grooming the successor takes years, it means sharing and
making an unselfish approach to equity transfer for an appropriate
value. Perhaps you could think about moving aside out over
a period of time but perhaps remaining involved with certain
clients or areas of the business.
Every Company should create continuity
as do solicitors who have made it their practice to bring
in young partners so that the older ones can eventually enjoy
their latter years. Why close a business at retirement? Why
not aim for the perpetuity? Do you have a successor plan
in place or are you hoping against hope that you can sell
the business to an outside body on retirement. Consider a
programmed plan of entry and exit, with dignity and value.
Successor Business Planning should be a
programmed reality where business continues after retirement
with often the same trading name in the same office but with
new people carefully trained to take-over. |
