Business Succession Planning
Business Insurance is designed to assist in funding your Business Succession needs should an unexpected event impact either you, your business partner, or a key person within your business.
It’s about making sure you have the appropriate agreements and funding mechanisms in place to transition the business in a timely manner. Business Succession Planning is a collaborative approach requiring skills from all your professional advisers being Accountant, Solicitors and Financial Planners. The goal is to protect business owners and their families – now and into the future. There are two main areas that a business owner needs to consider:
- Insuring key people in the business (key person insurance) for either capital or revenue needs
- Continuity of business ownership (business succession planning)
Key person insurance is different to buy/sell (succession planning) insurance. Key person insurance is designed to protect the business if it loses a key person as the name suggests. The insured party may not be the business owner(s), rather it may be a key individual that is vital to the business. There are two types of covers for Key person insurance being Key person capital or Key person revenue and both have different roles to play in ensure the business remains robust and viable. In contrast, buy/sell insurance is designed to protect the business owners. The insurance provides the proceeds to buy out the deceased/disabled person’s interest in the business.
Key elements to understand when obtaining Business Succession Planning advice would be:
- The roles of different professionals (accountants, solicitors, and financial planners)
- What are the different ownership options for the different types of cover?
- What are the tax implications for the different types of cover and ownership structures?
- Determination of the appropriate levels of covers
- Premium Structures and payment options
- The type of succession agreements
- Are there alternative funding options?
Seeking professional advice is paramount to ensure the business or owners receive the right amount of money, at the right time, in the most tax effective manner.