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Business Protection

Protecting the family business.

Hard work and dedication has meant that you have built up a sound business to benefit you and your family and naturally you would want to ensure that your loved ones are provided for in the event of your death. So what if the worst should happen and either you, or a business partner were to die?

Who would actually be entitled to this share of the business?

Without a valid Will the deceased’s share would be subject to the Laws of Intestacy and the person who inherits may not be the person you intended.

Would you or your business partner be content to run your business with their surviving spouse or their beneficiaries?

This could have a major impact on the running of the business or the value of the business may now go down following the death of such a key person.

Would they even want to be involved with the running of the business?

Many spouses would probably not want to be burdened with the running of a business they may know very little about. For instance, if there are young children to care and provide for then the surviving spouse might prefer to be bought out.

Would you have sufficient funds to purchase the deceased Director’s share from his family?

Or would the business have to be sold?

If the business is sold by the deceased’s beneficiaries, how would this impact on their estate as their assets increase? How would it also affect the surviving business partner’s assets as these too increase? Both parties’ estates could be impacted by Inheritance Tax in the future, having now lost any Business Property Relief previously available whilst the company was still trading. With the sale of the business you risk losing 40% of the cash proceeds to the tax man.

Perhaps you have made some provision for this eventuality.

You may feel that you have prepared for the worst and taken out sufficient life cover to protect all parties’ shares of the business. You may even have had the presence of mind to set up a Company Will and a Cross Option Agreement.

This would ensure that the surviving business partner/s has the right to buy out the deceased’s share of the business. The proceeds of the life assurance policy could be paid to the surviving spouse or beneficiaries, in exchange for their inherited share of the business. Equally, the surviving spouse or beneficiaries would be able to exercise their right to sell this share of the business to the remaining business partner/s in exchange for either the market value or an agreed amount covered by a life assurance policy.

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