You may need to consider the impact on your business and/or your family should any of the circumstances mentioned above unfortunately come to pass.
- Would your family stay in the business or would they be required to sell the business?
- Would the remaining shareholders/partners, such as Canada online casino Maple Leaf, in the business have the funds needed to buy your share from your family?
- Would you have the funds available to buy your co-owner’s share of the business from their family?
- What would be the impact on your business in the event of the death/impairment of a key employee or business partner?
- What about the tax implications?
It won’t happen to my/our business
Many business owners believe that it simply won’t happen to them. The chances of one partner / director, in a two or three man business dying or becoming seriously ill before retirement, are probably a lot higher than you might think and it does happen. Quite often what is left is a very serious financial problem mainly through the lack of readily available capital to deal with the consequences.
There is a Solution
Business protection can assist in ensuring the continued survival of a business and provide for a deceased business owner’s family in the event of premature death or serious illness and incapacity.
Shareholder/Partnership Insurance (Business Owner’s Insurance)
This provides funds, through the proceeds of an Insurance Policy, to the surviving business owners to purchase the share of a deceased’s shareholding from their personal representatives. Depending on the structure of the business the cover can be set up on a personal or corporate basis. This cover ensures the deceased’s legal representatives / next of kin are provided for and the surviving business owners retain control of the business. The cover in question should be carefully co-related to a properly structured shareholders agreement that addresses the wishes of shareholders/co-owners in the event of such an occurrence.
This type of cover is designed to protect the human assets of the business in the same way as fire insurance protects a company’s physical assets. Protection, again through an appropriate Insurance Policy, is taken out by a Company on the life of a key employee to protect the Company as a result of the death or serious illness of the key employee.
Gift or Inheritance Tax Planning
As a business owner, it is important also to take a close look at the implications of Capital Acquisitions Tax if you are planning to pass on your business to your family when you die. Inheritance tax can become a real burden where financial resources are tied up in a business. If you do not plan ahead, your family could be faced with a difficult decision between having to sell the business or having to borrow the money to pay the tax liability. There are a number of solutions to this and Gift or Inheritance tax planning allows you to plan for the tax liabilities which could arise, thus ensuring that the business won’t have to be sold off to pay the tax bill.
The Next Step
Each of the situations outlined in this article requires very careful consideration and planning. The very first action should be to seek good and expert advice. Why not give us a call and together we can set the proper planning in train.