Business Protection

Many small yet successful businesses operate as a partnership of two or more individuals, each one of which often brings a unique and valuable skill to the table.

If one of the partners dies, his share of the partnership or company passes on to his estate, often a surviving spouse or children. Technically speaking, if the business is a partnership, the partnership is dissolved, which may not be convenient to the surviving partners. If the business is a limited company, the surviving beneficiaries will inherit the deceased shares, and in so doing, will own part of and possibly even gain a controlling influence over the remaining business, but without necessarily having the knowledge or skills to contribute.

It is often in the interest of all parties to put in place an agreement that allows the surviving partners or shareholders of a company to 'buy out' the interest of the deceased partner/shareholder. Such an arrangement can provide the deceased heirs with a cash lump sum equivalent to their inherited share, whilst returning ownership and control of the business to the surviving business. There are a number of ways of doing this, including buy and sell agreements, and cross option agreements. The best option will depend upon your company's circumstances and those of its potential beneficiaries.

It is important therefore to establish a detailed understanding of all of the relevant factors that can influence which type of agreement you have in place and which type of agreement is suitable.

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