Your Business

What Happens to Your Small Business if Something Happens to You?

By Caron Beesley

Many small business owners are business owners for life, but what happens to your business if something happens to you?

I recently attended an estate planning seminar and my mind quickly shifted focus from wills and trusts to business succession planning and contingency plans. Not all businesses are created equal, of course, but here are some tips for protecting your income and your business should something happen to you.

Protect Your Assets
If you are planning on financing business growth, try to avoid using personal assets as collateral. If you are unable to repay your loan due to illness or death then the lender could come after your home and other assets. Instead, try to secure the loan with company assets.

Protect Your Income
Do you have a plan to protect your income and your family should something happen to you? One way to do is to take out a personal disability insurance plan that will cover you in the event of short- or long-term disability from injury or illness.

Keep the Business Afloat
Another option that you may want to consider is business overhead expense insurance. This form of disability insurance is another tax-deductible risk management policy that takes care of expenses like salaries, rent, utilities, and other overheads during the duration of an illness-related absence.

Cover Your Losses
Losses are an inevitable consequence of the absence of the owner from the business, but another form of insurance can also protect against this. Critical illness insurance pays out a one-time sum to cover losses incurred as a result of a critical illness. Once a covered condition is diagnosed, a tax-free payment is made and can be used to fund business expenses and pay off debts to suppliers and lenders. Some policies also pay out over time, for example if you were to have a second heart attack five years after your first, you may be eligible for another cash payment.

When the Worst Happens
If you intend to keep your business running after your death, get legal advice about putting a succession plan in place. You can also purchase life insurance policies that cover the costs of hiring individuals to fulfill certain roles in the event of your death and retain existing employees.

If you’ve borrowed money in the form of a business loan, the bank may also require that you or the business has a life insurance policy that guarantees repayment of the loan in event of your death.

Get Legal Assistance
We never know when a personal crisis will strike, so take these steps and be prepared. Of course, none of the information in this blog constitutes legal advice, so talk to a business insurance agent and a business succession planning attorney for strategies that can protect your business.

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