MHA
Should an entrepreneur consider key person protection?
As an entrepreneur, which of your business assets require greater protection? In the event of any problems, your fi rst response may be to prioritise your tangible assets, to reduce the risk of profi t loss and business disruption. However, insuring against the loss of your most valuable
David Hume Independent Financial Adviser MHA
assets - specifi cally, your key employees or yourself if you are a sole trader – is arguably of greater importance. In this insight, we look at why protecting your key
people is of critical importance, and their tax position in such scenarios.
Identifying your key people T e identifi cation of a key individual who should be insured varies for each business, and it is essential to consider potential issues that could have an impact, including: ■ How readily could the business fi nd a replacement for their expertise?
■ Would it lead to a decline in goodwill or stricter credit terms from suppliers?
■ Would their absence hinder business growth initiatives or current projects?
■ Are there any loans or overdrafts that rely on the key individual?
■ Could the business risk losing customer orders? ■ Would the business be deprived of their administrative or managerial input?
Key person insurance presents numerous advantages
for entrepreneurs and their businesses, particularly those that depend signifi cantly on specifi c individuals. Here are some principal benefi ts:
Financial Stability ■ Offers a financial buffer to assist the business in recovering from the loss of a crucial individual.
■ Assists in covering costs such as recruiting and train- ing a replacement, settling debts, or compensating for lost income.
Business Continuity ■ Provides peace of mind that the business can maintain operations seamlessly without signifi cant interruptions.
■ Help maintain confi dence among employees, clients, and investors during these uncertain diffi cult periods.
Credit Protection ■ Improves the business’s credit profi le by demonstrating to lenders and investors that a strategy is in place to manage the loss of a key person.
■ Can be utilised to secure loans or lines of credit.
Tax-Free Process ■ T e death benefi t received by the business is typically tax-free, enabling the entire amount to be allocated for business tax implications.
ALL THINGS BUSINESS | 12
requirements without additional
FINANCE
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72
