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What happens if a Partner in your business passes away?
Not only do you lose their experience and know-how, but there is an associated risk their share of the company passes to someone else. That individual might have little interest or expertise in the sector or – worse – may be hostile to your objectives.
Equally, a Partner diagnosed with a critical or terminal illness may want to leave unexpectedly and sell their share of the business.
This is where Partnership Protection insurance can help.
The value of protecting your partnership
Partnership Protection insurance is important because there are financial implications to consider if your business loses a Partner.
Without a plan in place, it may force you to consider selling assets to raise enough capital to buy them out or, if they die, to compensate any dependents.
One safety net is a pre-arranged scheme, with consideration given to the following options:
- Life insurance cover to fund the purchase of the deceased’s interest in the business
- Advice on a suitable agreement to ensure the Partnership continues, and compensation for the deceased’s dependants
- Arrangements for Partners who retire, or fall critically ill and cannot work
Benefits for Partners
Partnership Protection provides a company with a cash lump sum if a co-owner or partner dies, or suffers a serious illness.
If that happens, you will want to ensure the business has stability and continues its smooth operation.
Partnership Protection sets out the procedures and policies to help you retain control:
- Agreements, insurance, and trusts can protect the business against the financial and practical implications of a Partner’s death, or a specified critical illness
- Arrangements which can help ensure a Partnership is not automatically dissolved
- Helps to protect your business interests against hostile parties, or disinterested inheritors
- Makes a lump sum available to buy out the deceased’s share of the business at a fair market value
- Encourages continued prosperity
- Avoids the sale of assets to buy a departed Partner’s stake
- Helps retain confidence of both employees and customers
Article expiry: 05 Apr 2018
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Alan Neil H