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Keeping your greatest asset - and your greatest responsibility - safe

Maintaining resilience and continuity in your business.

Self employed? Here’s how to safeguard your business and your family

If you're self-employed, your business can be your greatest asset and your greatest responsibility - here's how to keep it safe. come what may

It’s all down to you…

If you’ve been brave enough to go into business on your own, you’ve got plenty on your plate already, we know. Marketing, finances, admin, staff, insurances, you name it, it’s your problem to solve.

But here’s another problem to think about for a moment -  if something happened to you, what would happen to your business? Who’d take care of your clients and suppliers? What would happen to your employees? Closer to home – what would happen to your family?

There’s a whole range of protections available to take away this worry and keep your business thriving come what may, and in this article we're going to share with you the two most effective solutions for minimising the impact and maintaining continuity if the worst were ever to happen.

 

Protection in case you die ….

First and most foremost, get your will written, obviously! From a business perspective, the key is to appoint the right executors. You can appoint extra executors specifically to take care of your business affairs, while your main executors look after your personal assets. This is a really useful measure that can save a lot of stress for your family.

For example, you might be perfectly comfortable with your other half being responsible for your personal assets such as your house and your savings. But they might not have the knowledge or the skills to take over your business if something happened to you. And that would be even more of an issue while they’re trying to cope with bereavement.  The solution is to appoint a colleague, or perhaps your accountant, as your business executor, who could keep the business running and make sure your family receives the profits. They could even arrange for the business to be sold as a going concern, with the proceeds going to your family to provide them with security.

 

Protection in case you become disabled …

So much for passing away, but what if you became seriously ill or suffered a disabling injury? You can protect your business from that risk by making a Lasting Power of Attorney for Financial Affairs.

Consider who would be best equipped to run the business for you if you were too ill to do so yourself. That would be the best person to appoint as your attorney. You can appoint that person to run your business, while appointing your partner or close family member to handle your personal finances.

Without an attorney appointed in advance, your family would be forced to ask the Court of Protection for the power to run the business on your behalf, but that process takes months and costs a fortune – and potentially leaves your business on hold, probably losing money, while the application goes through the court process. 

 

How we helped Gary and Lee …

Here is an example of a business we helped recently. Gary and Lee – not their real names, confidentiality is essential! – run an IT business together, as a limited company. They were referred to me by their accountant because they both have wives and young families who depend on them, but neither of their wives have IT skills or in-depth knowledge of the running of the business. They really wanted to make sure things would always run smoothly and their families would be secure if something happened to either of them.

In their wills, they appointed each other and their accountant as business executors, and gave instructions for the business to be managed in the short term in the event of either of their deaths, and sold as a going concern if necessary. They bequeathed their shares to their wives, but without their wives having to take over directorship of the company.  This meant, if they passed away, their wives would receive an income from the business in the form of dividends, and their wives’ inherited shares could be sold if necessary, to provide a lump sum for security.

They each made financial powers of attorney, appointing each other and their accountant as attorneys in respect of their business affairs, and their wives as attorneys for personal finance matters.  This ensured the right people were in place to look after the business, and to take care of any personal financial matters, if either of them suffered a disabling illness or injury.  

We also drafted a shareholders agreement for them, which set out the basic rules for the running of their business. In the event of a death or serious illness or injury, the agreement gave each the first option to buy out the other’s shares in the business.

Finally, working hand-in hand with the Shareholder’s Agreement and with the help of their financial advisor, they arranged key man insurance which would provide a lump sum in the event of death or illness, which would be used put their buy-out option into effect.

 

So, what are you going to do now?

As you can see, much can be done to protect your business if the worst should happen. If you can only do one thing right now, though, focus on the Lasting Power of Attorney. This is the most immediately effective measure because you don’t have to be permanently disabled to use it. You can use it temporarily if you have to go away or be off on sick leave for example -  it provides a safety net for day to day use.

For help with making a plan to protect your business, feel free to full in the contact form below or ring us on 0151 601 5399 – we’re here to help you keep your business thriving, whatever may happen.

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