Get Your Own House In Order First!

At Integra Financial we take integrity so seriously, we named our business after it!

So it made sense that when we began offering advice to our clients in the area of Business Protection, that we looked internally first to see what the needs of our business were.

With the aid of our qualified Business Protection Specialist, Gavin Culverhouse, we soon identified several people risks to our business. We enjoyed the process so much, we thought we would make a video about it!

We identified the following risks needed protecting:-

1. Death or Serious Illness to a Key Person

If either one of the Directors were no longer able to work in the business then the operational responsibilities for the other would double overnight. Also, these extra responsibilities would be new to the remaining Director, causing even more disruption. Their ability to then achieve their sales targets is diminished. Since sales drive the turnover and profit for the business, this immediately creates a problem that needs resolving. A Key Person policy can pay a lump sum benefit to the business that can be used to plug a hole in profits, hire a temporary replacement, recruit and train a permanent replacement.

A Key Person doesn’t have to be a Director and in fact the Directors, Will and Ryan identified our Client Relationship Manager is also key to the smooth running of our business so protection would certainly be needed if something were to happen to her.

2. Death or Serious Illness to a Shareholder/Owner

Besides the profit hole left as highlighted already, death or serious illness of a Director poses another problem. Our Directors have grown a business and generated something of value. Our Accountant helped to place a suitable valuation on the business so that we could ensure that the families of a deceased Director would be suitably compensated upon their death. Equally important, the shares of the deceased Director are then placed back into the hands of the surviving Director so they can move the business forward with full control.

Absence of such a plan would risk the shares passing to the family of the deceased. They have little use for the shares and would prefer suitable compensation. Also, they are unlikely to have the skillset to step in the shoes of that Director. The surviving Director will not likely have the funds to buy those shares back without the help of such a share protection plan. With a little forethought, this problem is quickly resolved and all parties get what they would want.

Our friendly Solicitor helped us to draw up the relevant trust and option agreements to make certain the right money, ends up in the right hands at the right time.

3. Long Term Incapacity of a Director

If one of the Directors were to be sick for a long time then the business faces an awkward decision. Does it continue to pay them a salary? How long should it do that for? Will the business have the funds to afford such payments? What if the Director is income generating and there is a gap in turnover, meaning the business couldn’t afford to pay them even if it wanted to?

By looking at Executive Income Protection, the liability for paying the incapacitated Director is transferred to an insurer meaning only the premium needs to be afforded. The premiums are paid by the business profits so a saving on Corporation Tax and there is no “benefit in kind” tax liability on the Director themselves.

Even better, we were able to protect the employer national insurance liability and the pension contributions made to the Directors by the business. A huge win compared to a personal income protection plan that the Directors would have to pay from their own incomes and have limited ability to continue pension contributions in the event of a claim.

4. Protecting the Family of a Deceased Director

Not strictly a business protection policy but tends to fall into the classification since it is owned and paid by the business, a Relevant Life Plan means if a Director (or other covered employee) passes away whilst employed by the business, a “death in service” lump sum benefit will be paid for the family/beneficiaries of the deceased.

Just like Executive Income Protection above, a Relevant Life Plan is paid by the business from profits meaning it is highly tax-efficient. Once again, there is no tax liability on the Director as it is not treated as a benefit in kind.

This means our Directors can leave their families a sum that compensates them for the lost future income the business would have paid the Director.

The exercise allowed the Directors to feel secure and comfortable that the business could now ride out any of these catastrophic events which otherwise might have meant the end of the firm and left employees out of work.

Long Live Integra!

Watch the video to see what we did and why, then contact us on 0117 251 0083 to discuss how we can protect the risks to your business.