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In every business there are key personnel without
whom the business would suffer or, at worst, not survive at all.
For this reason several levels of Key-Man Insurance
are worth considering to ensure that your business is not damaged
by the temporary or permanent loss of an invaluable member of staff.
Critical Illness cover is recommended to pay a lump
sum to the business should a key director or employee be diagnosed
with a life-threatening illness to give the company the opportunity
to find a replacement or to compensate for the financial losses
that might be incurred.
PHI can also be taken out to cover the business
for short-term loss during periods of hospitalisation, but this
is less common as these policies pay weekly or monthly amounts
after a deferred period, rather than a lump sum.
Straightforward life assurance such as Level Term
should definitely be considered for all key personnel, the loss
of whom would seriously damage the business.
In all cases, of course, the company pays the premium
and is the beneficiary.
Self Employed persons will need to make their own pension arrangements
or they will not have a pension when they retire.
Many self-employed business people assume that their
business can be sold when they wish to retire and that this will
produce a lump sum to provide their income in retirement. However,
for most small firms, this simply will not happen.
The business may be either unsaleable because its
revenue is reliant on a single person's skills or the sum produced
will be much lower than expected. Those relying on this occurrence
should be ruthlessly realistic in their expectations because they
may well find that it is too late to make alternative arrangements
nearer to retirement.
Pension investments can be made on a regular monthly
or annual basis or as individual single variable premiums.
If you have not yet started any pension planning
then, as a Sole Trader or Partner, you will probably be best advised
to look at a Personal Pension Plan.
Owners of businesses have a lot of scope to invest in pensions,
and it is very important that they use that fund to support their
business.
For example, a pension fund can invest in property,
and then rent it out to your own company, becoming your own highly
tax-efficient landlord.
This means that, not only is your rent still a tax
deductible expense, but also that it goes straight into your pension
fund, eventually to be returned to you as a pension. Your pension
fund can also act as a private bank, lending money to the company
for expansion and other development plans.
How many smaller businesses close down or go out of business at
retirement, simply because the Key Man did not plan ahead?
Planned succession is the only way ahead, grooming
the successor takes years, it means sharing and making an unselfish
approach to equity transfer for an appropriate value. Perhaps you
could think about moving aside out over a period of time but perhaps
remaining involved with certain clients or areas of the business.
Every Company should create continuity as do solicitors
who have made it their practice to bring in young partners so that
the older ones can eventually enjoy their latter years. Why close
a business at retirement? Why not aim for the perpetuity? Do you
have a successor plan in place or are you hoping against hope that
you can sell the business to an outside body on retirement. Consider
a programmed plan of entry and exit, with dignity and value.
Successor Business Planning should be a programmed
reality where business continues after retirement with often the
same trading name in the same office but with new people carefully
trained to take-over.
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