By Brad Cummins
What is the value of your company without you? If you are a sole proprietor or partner in a fairly small or family-owned business, you can be sure that a great part of your enterprise’s value is what you bring with you to work every day.
Your company’s worth hinges on your knowledge, connections, experience, and reputation. This means that many people, including your employees, customers, and family members, depend upon you.
Since most companies are not completely liquid investments, it is likely that without you, these dependents would need some cash to fill the void.
What’s Your Business Worth Without You?
Without the owner, a thriving bakery might only be worth the salvage price of some used kitchen equipment. An expensive consultancy may only be valued at the cost of some office space and computers. Where would that leave your partners, employees, and even your family if you unexpectedly passed away?
Maybe you are grooming managers, family members, or employees to take your place, but in the case of most small and family businesses, it would take time for anybody to actually step up to replace you. If losing you means even a temporary reduction in revenue, then it’s possible that all the hours you have spent to build up your business really would pass away when you do.
These are some questions that you may want to ask yourself about your business:
• If you have a business partner, could he or she buy your family out to continue the business solo?
• If you plan to leave your business to one child and not others, how can you take care of the other children in a fair way?
• Without your income, how could your family keep paying the mortgage and other bills?
• How long would it take for your business to compensate for the lack of your contribution?
How Life Insurance Preserves Your Business Legacy
Often called key man insurance, this type of life insurance can be used to provide a company with cash to help it recover from the loss of a valuable asset. Companies purchase these policies on business owners, partners, and even critical employees. The cash proceeds can help companies make up for the loss of valuable people, and in some cases, the money can also transfer business ownership by providing a liquid asset that could be used to compensate heirs of the deceased person.
These are some things that people who are good at financial planning for their business and family understand about life insurance:
• Liquidity: Selling a business can be time consuming and difficult. When an owner passes away, it is often impossible for the value of the business to replace the lost income. Life insurance pays in cash. If the business is to continue running, time may be needed to replace the contribution of the owner, and this money can buy that time without forcing the business to sell other assets.
• Income replacement: The cash proceeds from the death benefit can help replace the lost or loss of income that losing a key person causes. For the business, it can replace any lost revenue from a temporary interruption in service caused by the loss of an owner; for the family, the cash can help replace lost paychecks.
• Wealth transfer: There are many ways to use life insurance to transfer wealth. One use can be to buy out heirs who won’t inherit the business, so those who are involved in the company can keep the company intact.
Protect Your Business and Family
No matter what, it’s important to have a plan. Business life insurance can give business owners, employees, partners, and family members peace of mind and make companies more valuable. You can enjoy all of the advantages of using life insurance to help transfer business assets and wealth to make sure that your legacy stays protected.
About the Author
Post by: Brad Cummins
Brad Cummins is an independent life insurance agent and founder of Local Life Agents, a top independent life insurance agency that offers life insurance products in all 50 states. With a team of veteran professionals and aided by its exclusive Quote Engine, Local Life Agents represents close to 40 major life insurance companies. These strengths enable Local Life Agents to find the best company, with the best policy, for a person’s particular situation. The go-to resource for men and women, couples and families, Local Life Agents makes buying life insurance easy, transparent, and efficient. For more information about Local Life Agents, please visit www.LocalLifeAgents.com.
Company: Local Life Agents
Website: www.locallifeagents.com
The post Until Death Do Us Part: Will Your Business Die With You? appeared first on AllBusiness.com
The post Until Death Do Us Part: Will Your Business Die With You? appeared first on AllBusiness.com.