The death of a business partner is devastating; not just because you are likely to be friends as well as colleagues but also due to the implications for the business. Whether you are in business as a partnership or limited company thought should be given to what would happen in the event of death. In many cases it is unlikely that you would want your business partners spouse or children to “help” you run the business, and it is much more likely the deceased estate would want to be paid a fair price for their share of the business.
You have probably discussed this already, but if it has not been documented then the agreement made verbally may not carry much weight. If a share purchase agreement is in place, it is essential to make sure that the business has sufficient capital to pay to the deceased’s estate. This may be more than the company has in cash deposits, especially in current economic climates where profit margins are being squeezed.
The answer lies in life policies where the proceeds can be paid tax efficiently to the remaining business partner(s) or shareholders to enable them to purchase the business interest or shares from the deceased estate. You could add critical illness cover so that proceeds are paid in the case of a very serious illness.
As a business owner you should consider the effect on your business if any key personnel die. If for example your business development manager dies, is that likely to lead to a downturn in profits, putting financial strain on the company whilst you deal with the task of a replacement?
Most of us tend to have thought about the effect of our death on our family’s finances; covering the mortgage in case of the worst. However, if you have not done so already, now is the time to consider these events within your business.
Red Star Wealth have extensive experience in this area and are happy to help.
Kristen Durose
Red Star Wealth Management
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