Unfortunately, the reality is most business owners don’t take proper holidays. Usually, because their business relies on them too much, and they don’t have the support to keep the business running without them.
If you had to take an extended break due to a severe illness or injury, do you know what would happen to your business? Have you considered that? Would the business survive? How would the bills get paid? It may not be nice to think about now but, if you were to die, are you positive your business partners would give your family a fair deal? For just these reasons and many more, it is vital for all business owners to have a detailed succession plan. Creating a succession plan is like creating a will; it is essential for a business. However, there is often a wider range of scenarios and options to consider.
A good business succession plan can vary between businesses. Below are some key areas that should always be addressed.
Business Structure
In the event of retirement or death, the control and ownership of the business may need to be transferred to the owner’s loved ones or the surviving business partners. This can occur easily depending on how the business operates, such as a company or through a trust, or without a separate entity at all.
Succession agreements
If one of the business partners were to suddenly not be able to work, would a family member take over control of that share of the business? If the answer is no, then a succession agreement can aid the operation of the business via the other business partners while allowing for compensation for the former partner’s family.
Managing risk
Just like your own personal insurance, business insurance can provide a range of protection, such as temporarily meeting the standard costs of running the business (business expenses cover) or paying for a short-term replacement manager (e.g., disability or trauma cover). Having a life insurance policy linked to your succession plan that can provide the deceased partner’s family with suitable compensation for the transfer of business ownership to the surviving partners is also a good idea.
Powers of Attorney
Without a key decision-maker, small businesses will struggle too much without the advice that the authority would have given them. A Power of Attorney is vital to any good succession planning process, helping the business physically operate if the owner is incapable due to injury or illness.
There are a variety of people who may need to be involved in setting up a succession plan, including a lawyer, accountant, and financial adviser. We can help you find the right team for your business. Having a plan in place already is excellent. However, it is vital to review these insurance policies and agreements to keep them up to date and reflect the current value of your business.
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