As a business owner, you need to ensure that you have adequate insurance coverage to protect your family, business partner(s) and key employees, so that no matter what the future holds, the business can continue to provide for those who depend on it.
With the right insurance and financial strategies in place, you can guard your business against financial loss due to illness, disability or death. You can also enhance your equity, employee morale and retention with the right plans in place. Here are some tips for putting in place a proper plan that will help protect your business, yourself, your families’ and employee’s needs.
Obtain adequate life and disability insurance to cover all assets
Did you take out loans secured with personal assets to start or grow your business? If your family inherits the company and the loans have not been paid off, they might have to sell or liquidate the business (perhaps at a discount) to satisfy the debts. Protect them with an individual life insurance policy that provides funds to cover debts, ongoing living expenses and plans.
Have a plan in case a business partner becomes the only partner
A buy-sell agreement ensures that you or your co-owner will buy out the other’s share of the business when circumstances take one partner away from the company. In most cases, after the death of an owner, shares revert to the surviving family of that owner. This agreement will spell out what the partners want to have happen-then it is best practice to fund this agreement with life insurance protection.
Develop an exit strategy
Be prepared to leave your business, no matter what the reason, with a strategy that focuses on four key areas: estate planning, retirement planning, succession planning and business valuation.
A high percentage of businesses, especially family businesses, do not have a specific succession plan in place. However, the “wait and see” method also leaves owners working longer or doesn’t provide a specific timeline for cross training or equity enhancement strategies. Regardless of how long you have been in business, start thinking about this Now!
Insure the right-hand man (or woman)
Purchase key person life and/or disability insurance for employees who greatly contribute to the bottom line of your business; the policy’s benefits can help make up for lost sales or earnings and help cover the cost of finding and training a replacement.
Take care of the employees, and they’ll take care of you
Workers consider employee benefits (health, life, dental, vision insurance, retirement plans) a decisive factor when evaluating a new job opportunity. However, employee benefits can be costly if not built correctly, or with the right solutions in mind.
There are many different options and plan designs available. This isn’t as simple as picking something online or having just anyone help you through this process. Having the right plan in place is very important for every stakeholder. Is your retirement plan and employee benefits plan designed appropriately for you?
Reward the top executives
Section 162 plans (Executive Bonus Plans) are a simple way to reward top employees and offer certain tax advantages. Your employee purchases a cash rich insurance policy and names himself/herself as owner; you receive a tax deduction for paying the premiums, which are considered compensation to the employee.
This article is meant to be basic, yet informative. Having a customized analysis of your actual business and going through a YourBusiness Financial Fitness Assessment is crucial. This way, areas of importance can be identified for YourBusiness and an action plan can be developed to protect and keep more of what you are working hard for every day. If you have plans in place, this process can also be used as a Benchmarking tool to see if your plan is still viable for where your business is at in its cycle.
Contact David Kujawa today for a personalized and custom face-to-face consultation.
David has been guiding and advising business owners and their families through developing unique financial strategies for over 8 years. It is crucial that you have someone with experience within Business Owner Strategies and Retirement Planning to help you through to pursue your goals.