Business Protection
Safeguarding Your Business
Business protection cover offers a vital safety net for your business, shielding it from the financial repercussions that may arise when key individuals face a critical illness or death. This comprehensive insurance is designed to cater to partnerships (including limited liability partnerships), shareholders, sole traders and indispensable employees alike. With Business Protection Insurance, you can protect your business against unforeseen challenges, ensuring its continuity and stability.
Key Facts
Business protection is insurance cover designed to shield your business from the potentially devastating financial impact caused by key individuals being diagnosed with a critical illness or dying.
The protective benefits of business protection insurance extend to all types of business structures, including partnerships (including limited liability partnerships), shareholders, sole traders and key employees.
The setup and arrangement of business protection insurance are tailored to the specific requirements and nature of your business. We will work closely with you to customise a plan that aligns perfectly with your unique circumstances.
What is Business Protection?
Business protection is a crucial aspect of insurance that is often underestimated or overlooked by business owners. Its primary purpose is to empower business owners to prepare for unforeseen circumstances. Tailored protection ensures that your business can navigate through challenging times with minimal disruption in the event of the loss of a key employee or one of the business owners due to unfortunate circumstances such as death, critical illness or temporary disablement.
Business protection should be seen as a vital safety net, safeguarding the future of your business. It provides the necessary financial support and stability, allowing the business to sustain its operations and navigate through potential disruptions.
Don't leave your business vulnerable to uncertainties; prioritise business protection and secure the longevity and resilience of your enterprise.
What are the different types of Business Protection Arrangements?
- Partnership Protection: Tailored for partnerships, including limited liability partnerships, partnership protection provides coverage to ensure the business's stability and continuity in the event of the death or critical illness of one of the partners. It can also be utilised to guarantee the repayment of a business loan under similar circumstances.
- Shareholder Protection: Shareholder protection is specifically designed for businesses with multiple shareholders. It offers financial security by facilitating the smooth transfer of shares in the event of a shareholder's death or critical illness. This ensures business continuity while safeguarding the interests of all stakeholders.
- Sole Trader Protection: Sole traders can benefit from business protection as well. This coverage protects the business and its financial obligations in the event of the sole trader's death or critical illness. It provides the necessary funds to cover debts and maintain the business's operations during challenging times.
- Key Employee Protection: Key employees often play a vital role in the success and stability of a business. Key employee protection offers insurance coverage that safeguards the business against the financial consequences of losing a key employee due to critical illness or unfortunate demise. This ensures that the business can navigate through the transition and maintain its momentum.
- Loan Protection: Business protection can also be used to ensure the repayment of a business loan. In the event of the death or critical illness of a partner, key person, or sole trader, the coverage can provide the necessary funds to settle outstanding debts, protecting the business's financial integrity.
- Relevant Life Plans: A Relevant Life Plan offers a cost-effective and tax-efficient solution for providing life cover to you or your employees. By treating premiums as allowable business expenses, you can enjoy corporation tax relief while avoiding additional income tax and National Insurance contributions. It's a smart choice for both your business and your employees’ peace of mind.
The arrangement and structure of business protection will be tailored to suit the specific needs and type of business. Our experts will work closely with you to devise a customised solution that addresses your business’s unique requirements and ensures its long-term security.
Key Person Protection
There are two options for key person protection:
Own Life in Trust
The company holds a plan for the life of the key person. In the event of critical illness or death, the plan benefits are paid directly to the company, assisting with financial needs during reorganisation or hiring a replacement.
Assignments / Lasting Power of Attorney
The key person, typically a shareholding director, takes out a plan on their own life, written under trust. Other shareholders become potential beneficiaries, receiving the plan proceeds from the trustees to inject additional capital into the business if required.
Limited Companies and Limited Liability Partnerships
For Limited Companies where the key person is a shareholding director, an alternative solution exists. The key person can personally take out a policy on their own life and establish it under a trust. The beneficiaries of this trust would typically be the other shareholders of the company. In the event of the key person’s critical illness or death, the other shareholders receive the policy’s proceeds from the trustees. This enables them to inject additional capital into the business, ensuring its stability and mitigating any financial repercussions.
Limited Liability Partnerships (LLPs) share similar characteristics with limited companies in terms of being separate legal entities. Therefore, LLPs can also avail themselves of Key Person Protection. The partnership can take out a policy on the life of a key person within the LLP, safeguarding the business’s interests in the face of unexpected events.
Business Protection Insurance for limited companies and LLPs goes beyond Key Person Protection. It encompasses other crucial aspects that cater to the specific needs of these entities. One such aspect is Shareholder Protection. In limited companies or LLPs with multiple shareholders, Shareholder Protection ensures the smooth transfer of shares in the event of a shareholder’s death or critical illness. This mechanism protects the remaining shareholders’ interests while providing financial support to the deceased or critically ill shareholder’s family.
Moreover, Ownership Protection is a vital consideration for limited companies and LLPs. It addresses the potential impact of the loss of a partner, member, or shareholder on the business’s success and continued control for the remaining owners. Individual Purchase arrangements allow each business owner to secure a protection plan on their own life, written under trust for the benefit of other co-shareholders, members, or partners. In the event of a business owner’s death or critical illness, the trust’s proceeds enable the remaining owners to purchase the shares of the deceased or critically ill owner, ensuring a smooth transition and maintaining control over the business.
To ensure the effectiveness and enforceability of these protection mechanisms, it is advisable to establish a cross-option agreement between the relevant parties. This agreement outlines the terms and conditions governing the sale and purchase of shares in the event of death or critical illness. It provides a clear framework for executing the options and minimises any potential conflicts or uncertainties.
For limited companies and LLPs, Business Protection Insurance is a proactive and strategic tool that safeguards their financial interests and ensures the continuity and stability of the business. By planning for unforeseen events and potential disruptions, businesses can mitigate risks and protect their shareholders, directors, and key individuals. Consulting with experienced financial advisors and insurance specialists is crucial to tailor the most suitable protection plan that aligns with the unique needs and circumstances of limited companies and LLPs.
Business Protection Insurance is a critical consideration for limited companies and LLPs in the UK. Through comprehensive coverage, including Key Person Protection, Shareholder Protection, and Ownership Protection, businesses can mitigate financial risks and ensure the continued success and stability of their operations. Implementing a well-designed and customised Business Protection Insurance plan provides peace of mind to business owners, shareholders, and key individuals, knowing that their interests are safeguarded in the face of unexpected events.
Consult with our experts to establish the right safeguards for your business's continuity and stability.
Relevant Life Plans
Tax-Efficient Life Cover for You and Your Employees
At Lazenby’s, we understand the importance of protecting your loved ones and ensuring their financial stability, even in the face of unexpected circumstances. That’s why we are proud to offer Relevant Life Plans as part of our comprehensive financial advisory services.
A Relevant Life Plan offers a cost-effective and tax-efficient solution for providing life cover to you or your employees. By treating premiums as allowable business expenses, you can enjoy corporation tax relief while avoiding additional income tax and National Insurance contributions. It’s a smart choice for both your business and your employees’ peace of mind.
Key Benefits of a Relevant Life Plan
- Tax Efficiency: Relevant Life Cover offers tax advantages that make it an attractive option for both employers and employees. The premiums paid by the employer are usually treated as an allowable business expense, reducing their corporation tax liability. Additionally, the policy proceeds are typically paid out free from income tax, providing tax-free financial protection to the beneficiaries.
- Cost Savings: By offering Relevant Life Cover as an employee benefit, businesses can provide valuable life insurance coverage at a potentially lower cost compared to individual policies. This can be particularly beneficial for small businesses or those with a limited budget, allowing them to offer a valuable benefit without incurring excessive expenses.
- Financial Protection: Relevant Life Cover ensures that the loved ones of an employee are financially protected in the event of their untimely death. The policy provides a lump sum payment to the designated beneficiaries, helping to cover various expenses such as mortgage repayments, living costs, or other financial obligations.
- Flexibility and Personalisation: Relevant Life Cover can be tailored to meet the specific needs of both employers and employees. The level of cover can be customized based on the employee's salary, ensuring an appropriate payout amount. Furthermore, the policy can be structured to include additional features such as critical illness cover or terminal illness benefit, providing comprehensive protection.
- Employee Retention and Attraction: Offering Relevant Life Cover as an employee benefit can enhance employee satisfaction and serve as a valuable retention tool. It demonstrates a company's commitment to the well-being of its employees and their families, making it an attractive perk that can help attract and retain top talent.
- Inheritance Tax Planning: Relevant Life Cover can be placed in a trust, which offers potential inheritance tax planning benefits. By placing the policy in trust, the payout can be directed to the beneficiaries outside of the insured person's estate, potentially reducing the inheritance tax liability.
It’s important to note that the specific benefits may vary depending on the policy and the provider. It’s advisable to consult with a financial advisor or insurance specialist to understand the details and suitability of Relevant Life Cover for your specific circumstances.
Who Can Take Out a Relevant Life Plan?
Employees
The person covered by the plan must be an employee of a UK business. This includes both full-time and part-time employees.
Salaried Company Directors
Relevant Life Plans are also available to salaried company directors, as they are considered employees of the company.
Business Owners
Business owners can take out Relevant Life Plans for themselves if they are employees of their own company and meet the other eligibility requirements.
It’s important to note that Relevant Life Plans are not currently available for sole traders, equity partners of a partnership, or members of a Limited Liability Partnership (LLP). The eligibility criteria may vary depending on the insurance provider and their specific policy terms.
If you are considering a Relevant Life Plan, it is recommended to consult with a financial advisor or insurance specialist who can assess your individual circumstances and guide you through the eligibility requirements and available options.
Take the first step towards securing your financial future and ensuring peace of mind for you and your loved ones.
Schedule a consultation with Lazenby’s today to discuss Relevant Life Plans and uncover the tax efficiencies, cost savings and valuable protection they offer.
