You’re reading this because you indicated you are a business owner. First and foremost, congratulations on owning and operating your own business! You and others like yourself are what drive the Canadian economy and without small business owners, many people would not be able to find rewarding employment.
Owning your own business comes with a whole new set of challenges. Accounting, bookkeeping, hiring employees, human resources and finding new sources of business are just a few of the obstacles facing a business owner.
Just as it is important to have personally owned insurance to protect your loved ones in the event of your untimely passing, it is equally important to ensure your business is protected. As the business owner, if you become unable to work whether temporarily or permanently, it is vital to have a contingency plan in place to ensure your business continues to run as smoothly as possible. Three common solutions to this problem include Key Person Insurance, Business Overhead Insurance and Buy Sell Insurance on yourself and your partners.
Key person insurance involves putting a corporate owned insurance policy in place so that in the event of a premature death, the business has sufficient capital to hire a replacement business manager, pay off corporate debts and provide cash flow stability.
Business overhead insurance involves putting a disability policy in place that will pay the business overhead expenses in the event that the business owner becomes disabled and is unable to work.
Buy Sell insurance involves putting a corporate owned insurance policy in place so that in the event of a premature death of one of the shareholders the corporation has the necessary capital to purchase the shares of the deceased shareholder. There are many different methods of structuring buy sell insurance. For more information on this or any of the other topics above, please contact out office to arrange a meeting.
Although planning for the worst is prudent, having a long term succession plan in place for yourself and your business is essential. In many cases, your business represents the single largest asset you own. What are your long term plans for your business when you retire? Will you sell to a competitor or some other third party? Will a group of key employees buy your business or will one of your children take over the reins? Answering these questions is important both for the future success of your business, and for yourself personally to maximize the value you receive when you eventually retire. The impact of taxation on the value of your business can significantly erode what you receive when you eventually sell your business. Having a plan in place to help minimize these taxes is an important planning consideration for business owners.
At Five Seasons Financial, we specialize in helping business owners create these plans. We work in conjunction with your other professional advisors (accountants and lawyers) to ensure our recommendations are consistent with your business plans. If you have any questions or would like to schedule a meeting, please contact us.