Safe and Secure Transfers

Business Buy-Sell Agreements, Key Person Insurance, Business Expense Insurance and Debt Reduction or Guarantor Protection Insurance.

The majority of businesses in Australia are small businesses owned by individuals, Partnerships or Company Structures. Often little or no thought is given to how the business is to be transferred on too the surviving business owner/s should a life event such as death, disability or major illness, occur to another business owner/s.

In addition, most business are not prepared for such an event if it should happen to the Key Person responsible for the production of business income, resulting in a critical cash flow or profit reduction.

How would your business deal with the following:

1. On Death of a business owner, you have insufficient funds to payout the deceased person's estate for their share of the business to prevent a part or full sale of the business?

2. Conflicts of Interests with the new owners of the ex-partner's share of the business?

3. Non-Transfer of business ownership due to ineffective or non existent legal agreements?

4. Funds to cover loss in business income due to loss of a Key Person?

5. Funds to pay out business debts guaranteed by business partners?

6. Sufficient funds to cover business operating expenses whilst unable to work?

Types of Insurance Available

Buy-Sell Insurance -

This involves having in place a written buy-sell agreement to plan what you would do, should a life event such as death, disability, trauma or critical illness occur. In addition, various life/risk insurance policies are put in place to provide payment of funds for the buy-sell to proceed, should an life event occur.

This then provides the surviving business owner/s sufficient funds to buy the business from the estate of the owner; or the owner themselves, should they become disabled or suffer a traumatic event or critical illness.

Key Person Insurance -

Is Insurance to compensate a business, for any financial loss or cost suffered, because an insurable event has occurred with respect to a key person (main income producer or technical expert for example).

Debt reduction or Guarantor Protection Insurance -

Insurance put in place to cover an event that occurs to a director/guarantor that allows the business debt guaranteed by the director/guarantor to be paid fully out.

Business Expenses Insurance -

Insurance designed to cover business operating expenses, should there be be a fall in revenue as a result of inability of a sole trader/partner or sole director being unable to work. Insurance will provide a payment to cover a proportion of the business expenses.

Tax and Legal Issues

There are numerous Tax and Legal implications surrounding the structuring of Business Risk Insurance & Succession Planning - so professional advice is always recommended.

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