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Business Protection

Many businesses whether they are formed as sole traders, partnerships or limited companies hold assets in their balance sheet that are crucial to the ongoing success of the company. This could be a key machine, business property or a substantial personal loan made to the company by a shareholder.

These assets are normally exposed to the full business risks that the firm faces. Should the business find itself in trouble, say through a big bad debt, then those assets can be used by creditors to recover monies owed.
It is possible to protect these assets from business risk and make them available for future use but this does require action in advance, which is now!

Protecting Business Property

As a general rule we would always look at other ways of holding business property rather than directly in the company. A common solution is to sell the property to a pension scheme owned by the business owners. This route can also be an excellent tax efficient way of extracting cash from the pension.

An alternative route is to use all or part of the property as a company contribution into a pension. This route has the added significant advantage of reducing tax liabilities.

In both situations the asset is removed from the company balance sheet and away from the business risk. We deal with many of these cases each year. For more information call 0121 704 1354.

Directors Loans to the Company

In these situations the problem is that the director’s loan is an unsecured creditor in the event of a winding up. Should the director decide to pull out his or her money prior to liquidation or administration the liquidator would review all transactions entered into in the last two years.

Our solution involves making the loan under debenture. In this way the debt is paid preferentially to other creditors. That means the director or business owner can legitimately withdraw the loan without the fear of preference against other creditors. Please contact us if you would like advice relevant to your personal circumstances.

Key Business Assets and Intellectual Property

There are several routes to deal with these eventualities. The pension route should certainly be explored as noted above. However other solutions involve the creation of a holding company to hold the shares and key assets of the main trade. The company then rents key assets to the subsidiary.

To discuss possible options for your particular situation call 0121 704 1354.

Shareholder Protection

Have you ever wondered what it would be like to be in business with the spouse of your business partner? Well quite possibly not but if something were to happen to your business partner the chances are that this could be the outcome. Clearly this is not ideal for anyone. The spouse might want to obtain maximum value from the business. You would probably prefer to buy out the spouse and own all of the business.

Who benefits from Shareholder Protection?

  • Anyone in business with another person
  • Where there is value in the business
  • Where both business partners are insurable

This is a low cost solution to a common business problem.

How it works

Each business partner takes out life insurance (or life and critical illness insurance). The policy is written so that any proceeds are paid into trust. A separate cross option agreement is written to ensure the proceeds of the trust are used to purchase the shares of the deceased or ill partner.

What to do next

If you are in business with another person, especially if you are both unrelated then this solution should be seriously considered. You will probably have personal life insurance anyway. This is a simple way of taking care of your life insurance needs and sorting out what happens to your share of the business at the same time. Call 0121 704 1354 for advice on Shareholder Protection.

Parker Chartered Accountants and Financial Advisors is the trading name for PLW Advisors Ltd (Registered No. 10396831), 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