At Peavoy Financial Planning we know that protecting and minimising the risk to you and your business is of the highest importance to people that work in Partnerships.
As prudent business people you will most likely have already put measures in place to protect your business, such as insuring its property, equipment, stock and vehicles.
Whilst these are all very sensible precautions, you should also ask yourself two other very important questions.
1) If one of the Partners in the business were to die what would happen your business?
2) Would each of the surviving partners have the funds to buy out the deceased Partner’s share of the business?
Although these are not questions any of us like to think about, the reality is that the chances of one of the Partners in a firm dying during their working life, is much higher than you may think and the business consequences can be devastating.
Under the provisions of the Partnership Act 1890, the deceased Partner’s share of the business automatically becomes the property of their estate.
It effectively becomes a debt to the surviving partners, that can be immediately called in by the estate, unless there is a written agreement between the Partner’s to the contrary.
What could be the Financial Consequences for the Business?
- The surviving Partner(s) may be unable to raise the capital required to fund the repayment of the deceased’s share of the business to the deceased’s estate. Even when such funds can be raised by borrowing, the Partner(s) may be unable to sustain the payments in the long run.
- As a result the Partnership may be dissolved, with the surviving Partner(s) now no longer being part of a previously active and productive business.
- In the event where any of these implications might arise, a heavy financial burden will fall on the shoulders of the continuing Partners.
There is a Solution
Partnership Insurance offers a cost effective way to put the measures in place now to safeguard the future of your business and to help enable its’ continued financial stability.
It allows you to place a financial worth on each Partner’s share of the business. The solution ensures that the surviving partner(s) retain full control over the business, as they are in a position to immediately buy back a deceased Partner’s share.
Most importantly it also ensures that the surviving spouse or next of kin can immediately realise the value of the deceased’s share of the firm by way of a capital lump sum.
The ultimate aim of Partnership Insurance is to put in place the structure, processes and monetary agreements NOW, to pre-empt the problems that can be caused by a Partner’s death.
While Partnership Insurance of course cannot lessen the emotional blow and trauma caused by death of a colleague, it can help minimise the financial impact to the business and the deceased’s next of kin. In today’s uncertain world, that’s very valuable peace of mind.
So what next?
If your work in a Partnership, have a chat with your Financial Adviser and work out how to go about putting a structure in place to reduce this risk to your business and family.
If you would like to have a chat with me here at Peavoy Financial Planning please do make contact with me and we will work through your current situation with you.
I can be contacted on 087-2902206 or alternatively by email on david@peavoyfinancial.ie
David Peavoy BA, QFA, LIAP is the Owner of Peavoy Financial Planning whose practice is based in Office 5b, Portlaoise Enterprise Centre, Clonminam Business Park, Portlaoise, Co Laois.
David Peavoy T/A Peavoy Financial Planning is regulated by the Central Bank of Ireland
Disclaimer: All data and information provided within this blog is for information purposes only. It should not be taken as specific advice for your situation. Peavoy Financial Planning makes no representations as to the accuracy. completeness, or suitability of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its use
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