If you’re like many businesses you might have already insured the physical assets of your business from theft, fire and damage. But have you investigated the importance of insuring yourself – as well as other key folks your business – up against the possibility of death, disability and illness. Not adequately insured can be a very risky oversight, since the long term absence or loss of an important person could have a dramatic effect on your organization and your financial interests inside it.
Protecting your assets
The company knowledge (generally known as intellectual capital) supplied by you or other key people, can be a major profit generator on your business. Material things can always get replaced or repaired but a key person’s death or disablement can result in a financial loss more disastrous than loss or harm to physical assets.
If your key individuals are not adequately insured, your business could possibly be forced to sell assets to maintain earnings – particularly if creditors press for payment or debtors suppress payment. Similarly, customers and suppliers might not feel confident in the trading capacity in the business, and its credit rating could fall if lenders aren’t willing to extend credit. Moreover, outstanding loans owed with the business to the key person can be called up for immediate repayment to enable them to, or their loved ones, through their situation.
Asset protection can offer the company with enough cash to preserve its asset base in order that it can repay debts, take back cash flow and maintain its credit score in case a business owner or loan guarantor dies or becomes disabled. This may also release personal guarantees secured with the business owner’s assets (for example the family house).
Protecting your small business revenue
A drop in revenue is frequently inevitable whenever a key individual is no longer there. Losses may also result:
• from demand that can’t be met
• while you’re finding and training the right replacement
• from errors of judgement that may happen due to a less experienced replacement, and
• with the reduced morale of employees.
Revenue protection provides your small business with plenty money to compensate to the loss in revenue and charges of replacing a vital employee or small business owner if and when they die or become disabled.
Protecting your be part of the business
The death of the business owner can result in the demise of your otherwise successful business due to too little business succession planning. While companies are alive they may negotiate a buy-out amongst themselves, for instance by using an owner’s retirement. Suppose one of them dies?
Considerations
The proper kind of company protection to cover you, all your family members and colleagues depends upon your existing situation. A financial adviser may help you using a number of items you should address in relation to protecting your small business. Including:
• Working with your business accountant to discover the valuation on your organization
• Reviewing your individual Key Man Insurance needs to make sure you are suitably engrossed in potential tax effective and convenient approaches to package and pay premiums, and review any of your existing insurance
• Facilitating, with legal services from a solicitor, any changes that may are needed in your estate planning and be sure your insurances are adequately reflected within your legal documentation.
An economic adviser can offer or facilitate advice regarding every one of these along with other items you may encounter. They can also use other professionals to ensure all aspects are covered in an integrated and seamless manner.
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