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According to a recent survey, only 1 in 10 businesses have adequate business protection*. Let’s imagine a long established and very profitable business, Premier Engineering. The company is run by Bobby and Billy, who are both married with children. It was formed on a 50/50 basis, with them each sharing both the responsibilities and profits equally.

One day Bobby is killed in a tragic accident, naturally both families are devastated. From a business point of view Billy has lost a valuable business partner who contributed 50% to the running of their business. Bobby will be sadly missed and the business will never be the same again nor will it generate the same kind of turnover.

For Bobby’s family, things will obviously never be the same again as not only have they have lost a husband and a father but also the bread-winner of the family too. Although they still have a 50% share in the business which should give them some income, Bobby’s wife has no knowledge of running an engineering business, and finds her days are spent looking after their young children.

Billy now realises that not only has he lost a valuable business partner who helped make the business a success, but he also has a new business partner who will contribute nothing to the running of the business, yet still take 50% of the profits at the end of each year. Billy soon realises his family’s income will suffer too.

This scenario forces many businesses to cease trading. Billy has to start a new business all over again and Bobby’s wife has been left with 50% of a worthless company.

If Bobby and Billy had shareholder protection, things would have been different. The protection policy would have paid Bobby’s wife a lump sum of money equal to the value of Bobby’s share in the company and Billy would have been able to continue to run the company and keep the profits. This way everyone gets their fair share, thanks to a little bit of forward planning for both the business and Bobby’s family.

Could shareholder protection have a place in your business? Some business owners say that if a partner dies, their share should pass to the remaining partners, but, is that fair to the deceased partner’s family after he has spent years helping build a profitable business?

If you feel this is a concern to you, please contact us for a no obligation chat.

*Swiss Re Insurance Report

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