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Don't inadvertantly go into business with your partner's spouse

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Tuesday September 21, 2010 at 4:50pm
If you are in a business partnership now would be a good time to consider whether you fancy running your business with your partner’s wife or husband.

Strange thought? Maybe.  But that’s what would happen if your business partner died and their spouse inherited their share of the business.

Image this happens and they want you to buy them out but you can’t raise the funds? Chances are neither of you are going to be very happy with the situation. They will have lost a spouse and you will have lost the person with whom you share business problems, make financial decisions and agree direction and strategy.

Suddenly you find yourself without a highly valued colleague but with a new partner you do not really know. A partner who has no interest in the business, and is unable to contribute in any meaningful way. Now it’s down to you to keep the business going while they expect to share in the profits that you are now going to have to earn on your own!

This sounds like a disaster – and it could be, if you haven’t taken necessary precautions to protect your business and your family in these circumstances. A low cost life assurance policy with a cross option agreement can protect all parties in these circumstances. Such a policy would pay out a set amount, sufficient to provide funds for you to buy your business partner’s half of the business.

If you are a shareholder in a limited company or a partner in a partnership you should have Shareholder Protection cover, unless that is your business is worthless. But if that’s the case why are you in business...., I can feel another blog coming on.

Andy Parker
Chartered Accountant and Chartered Financial Planner

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Parker Chartered Accountants and Financial Advisors is the trading name for Parker Business Development Ltd (Registered No. 4116664), Parker Tax and Trust Ltd (Registered No. 06950353) and Parker Financial Planning LLP (Registered No. OC347027). Parker Financial Planning LLP is authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales – registered office contact details here