Sheffield Town Hall

Business Protection

Safeguard your business against unexpected events. Our comprehensive business protection solutions help ensure your company can continue to thrive even when facing significant challenges.

What is Business Protection?

Business protection is a range of insurance solutions designed to help protect businesses from the financial impact of unexpected events such as the death or critical illness of key people, shareholders, or partners. It helps ensure business continuity, protect profits, and provide financial security during challenging times.

Why Business Protection Matters

Many businesses depend heavily on a few key individuals whose expertise, skills, and relationships are crucial to the company's success. The unexpected loss of these people can have severe consequences:

  • • Disruption to day-to-day operations
  • • Loss of important client relationships
  • • Reduction in sales and profits
  • • Difficulty repaying business loans
  • • Challenges in recruiting suitable replacements
  • • Potential ownership complications

Who Needs Business Protection?

Business protection is valuable for companies of all sizes, but particularly important for:

  • • Small and medium-sized enterprises (SMEs)
  • • Partnerships and LLPs
  • • Limited companies with multiple shareholders
  • • Family businesses planning for succession
  • • Businesses with key employees whose loss would significantly impact operations
  • • Companies with outstanding business loans or financial obligations

The Business Protection Gap

Despite its importance, business protection remains one of the most overlooked areas of financial planning. Research shows that:

  • • Over 50% of businesses would cease trading within a year if a key person died or became critically ill
  • • Less than 20% of UK SMEs have key person protection in place
  • • Only 35% of businesses have plans for what would happen to shares if a business owner died
  • • 30% of businesses have some form of corporate debt that isn't protected

This protection gap leaves many businesses vulnerable to significant disruption and financial hardship when unexpected events occur. At Friends Capital, we help businesses identify these risks and implement appropriate protection strategies.

Types of Buildings and Contents Insurance

There are several types of buildings and contents insurance policies available, each designed to meet different needs and circumstances. Understanding the options is the first step in choosing the right coverage for your home.

Key Person Protection

Insurance that protects your business against the financial impact of a key employee's death or critical illness. The policy pays out a lump sum that can be used to cover lost profits, recruit replacements, or repay loans.

Best for: Businesses that rely heavily on specific individuals for their success

Shareholder/
Partnership Protection

Provides funds for the remaining shareholders or partners to buy the shares of a deceased or critically ill business owner. This ensures business continuity and prevents shares from passing to potentially uninvolved family members.

Best for: Limited companies with multiple shareholders, partnerships, and LLPs

Business Loan Protection

Covers business loans, mortgages, or director loan accounts in the event of a director's or guarantor's death or critical illness. Ensures the business can repay outstanding debts without financial strain.

Best for: Businesses with outstanding loans, mortgages, or overdrafts

Relevant Life Insurance

A tax-efficient life insurance policy that allows companies to provide death-in-service benefits to employees (including directors). Premiums are typically tax-deductible as a business expense.

Best for: Businesses looking to provide death benefits to employees in a tax-efficient way

Executive Income Protection

Provides a regular income to key executives if they're unable to work due to illness or injury. Helps maintain their standard of living while they recover and supports business continuity.

Best for: Businesses wanting to protect their key executives and directors

Group Protection Schemes

Comprehensive protection packages for all employees, including life insurance, income protection, and critical illness cover. These schemes can be valuable tools for attracting and retaining talent.

Best for: Businesses looking to enhance their employee benefits package

Benefits of Business Protection

Implementing a comprehensive business protection strategy offers numerous advantages that help safeguard your company's future and provide peace of mind.

Business Continuity

Ensures your business can continue operating smoothly even after the loss of a key person, providing financial resources to manage the transition period.

Financial Stability

Protects against potential drops in revenue, profit, and cash flow that often follow the loss of important team members or business owners.

Ownership Control

Enables remaining shareholders or partners to maintain control of the business by providing funds to purchase shares from departing owners or their estates.

Time to Recover

Gives your business the breathing space it needs to adapt to new circumstances, recruit replacements, and implement succession plans without financial pressure.

Debt Protection

Ensures business loans and other financial obligations can be repaid even if a guarantor or key person is no longer able to contribute to the business.

Tax Efficiency

Many business protection solutions offer tax advantages, with premiums potentially qualifying as allowable business expenses and benefits sometimes paid tax-free.

Our Business Protection Process

Implementing effective business protection requires careful planning and expertise. Here's how we work with you to develop and implement a comprehensive protection strategy:

  • Business Risk Assessment

    We'll conduct a thorough analysis of your business structure, key personnel, financial obligations, and potential vulnerabilities to identify protection needs.

  • Valuation and Coverage Calculation

    We'll help determine appropriate coverage levels based on business valuation, key person contribution, outstanding loans, and other relevant factors.

  • Solution Research and Design

    We'll research the market to identify the most suitable protection products and design a comprehensive strategy tailored to your specific business needs.

  • Implementation and Documentation

    We'll assist with applications, underwriting, and setting up appropriate legal frameworks such as cross-option agreements or trust arrangements.

  • Policy Placement and Setup

    Once approved, we'll ensure all policies are correctly established, premiums are set up, and all necessary documentation is properly completed and stored.

  • Regular Review and Updates

    We'll conduct periodic reviews to ensure your protection strategy remains aligned with your evolving business needs, making adjustments as necessary.

Our Business Protection Process

Implementing effective business protection requires careful planning and expertise. Here's how we work with you to develop and implement a comprehensive protection strategy:

Business Risk Assessment

We'll conduct a thorough analysis of your business structure, key personnel, financial obligations, and potential vulnerabilities to identify protection needs.

Save for a Deposit

Most lenders require at least 5-10% of the property value as a deposit. Government schemes like Help to Buy and Lifetime ISAs can help boost your savings.

Valuation and Coverage Calculation

We'll help determine appropriate coverage levels based on business valuation, key person contribution, outstanding loans, and other relevant factors.

Get Mortgage Ready

Check your credit score, gather necessary documents, and understand your budget. We'll help you prepare for the mortgage application process.

Solution Research and Design

We'll research the market to identify the most suitable protection products and design a comprehensive strategy tailored to your specific business needs.

Find Your Dream Home

With a mortgage in principle, you can start viewing properties within your budget and make offers with confidence.

Implementation and Documentation

We'll assist with applications, underwriting, and setting up appropriate legal frameworks such as cross-option agreements or trust arrangements.

Complete the Purchase

Once your offer is accepted, we'll guide you through the legal process, surveys, and final mortgage application to completion.

Policy Placement and Setup

Once approved, we'll ensure all policies are correctly established, premiums are set up, and all necessary documentation is properly completed and stored.

Move In

Congratulations! You've completed your purchase and can now move into your first home. We'll still be here for any future mortgage needs.

Regular Review and Updates

We'll conduct periodic reviews to ensure your protection strategy remains aligned with your evolving business needs, making adjustments as necessary.

Complete the Purchase

Once your offer is accepted, we'll guide you through the legal process, surveys, and final mortgage application to completion.

Frequently asked questions

Get answers to common questions about business protection and how it can safeguard your company.
How do I determine how much key person coverage my business needs?
The appropriate amount of key person coverage depends on several factors, including: 1) The key person's contribution to company revenue and profits, 2) The estimated cost of replacing them (recruitment, training, etc.), 3) Any outstanding loans or financial obligations they've guaranteed, 4) The potential impact on business operations and client relationships. We typically use methods such as the 'multiple of salary' approach (5-10 times annual salary), the 'contribution to profits' method, or a combination of approaches to arrive at an appropriate figure. Our advisers can help you calculate a suitable amount based on your specific business circumstances.
How is business protection different from personal life insurance?
While both provide financial protection in case of death or illness, they differ in several key ways: 1) Ownership: Business protection policies are typically owned by the company or other business owners, not the individual being insured, 2) Purpose: Business protection is designed to protect the company's financial interests rather than family members, 3) Premium payments: Premiums are usually paid by the business rather than the individual, 4) Tax treatment: Business protection may offer tax advantages, with premiums potentially qualifying as allowable business expenses, 5) Legal frameworks: Business protection often involves additional legal arrangements such as cross-option agreements or trust structures. These differences make it important to work with advisers who understand the specific requirements of business protection.
Is business protection tax-deductible?
The tax treatment of business protection depends on the type of coverage and how it's structured. Generally: 1) Key person protection: Premiums may be tax-deductible as a business expense if the policy is designed to protect profits rather than to compensate for the loss of a specific individual. However, any payout may be subject to corporation tax, 2) Shareholder/partnership protection: Premiums are typically not tax-deductible as they're considered a capital expense, and the payout is usually tax-free, 3) Relevant life policies: Premiums are usually tax-deductible and not treated as a benefit in kind for the employee, 4) Loan protection: Premiums may be tax-deductible if the policy protects the business rather than individual directors. Tax rules can be complex and subject to change, so we recommend discussing your specific situation with both a financial adviser and tax professional.
Do all business owners need to be insured under a shareholder protection arrangement?
While it's not mandatory for all shareholders to be insured, it's generally recommended for a comprehensive protection strategy. Having all shareholders covered ensures that regardless of which shareholder dies or becomes critically ill, the remaining shareholders will have the funds to purchase their shares. However, there may be situations where not all shareholders need coverage, such as: 1) When certain shareholders are elderly or have pre-existing health conditions that make insurance prohibitively expensive, 2) When some shareholders own a very small percentage of the business, 3) When certain shareholders have already made alternative arrangements for their shares. We can help you design a shareholder protection arrangement that addresses your specific business ownership structure and needs.
What legal documents are needed alongside business protection policies?
Business protection policies often require supporting legal documentation to ensure they work as intended. These may include: 1) Cross-option agreements: Legal contracts that give the remaining shareholders the option to buy shares (and the deceased's estate the option to sell) following a shareholder's death, 2) Trust arrangements: To ensure policy proceeds are paid to the right people at the right time, 3) Articles of association updates: To reflect the protection arrangements and share transfer processes, 4) Partnership agreements: For partnerships, detailing what happens to a partner's interest upon death or critical illness, 5) Director loan agreements: Documenting any loans to be covered by protection policies. These legal documents should be drafted by qualified legal professionals who specialise in business law. We work closely with legal experts to ensure your business protection strategy is properly implemented.
How often should business protection arrangements be reviewed?
Business protection arrangements should be reviewed regularly to ensure they remain appropriate and effective. We recommend a review: 1) Annually, as part of your general business financial review, 2) Whenever there are significant changes in your business, such as: a) Changes in business value or profitability, b) New shareholders or partners joining or leaving, c) Key personnel changes, d) Taking on new business loans or financial obligations, e) Changes in business structure (e.g., from partnership to limited company), 3) When there are relevant tax or legislative changes that might affect your protection strategy. Regular reviews help ensure that your coverage levels remain appropriate, premiums remain competitive, and the legal framework supporting your protection strategy remains valid and effective.

Protect Your Business Legacy

Don't leave your business vulnerable to unexpected events. Our specialist advisers can help you implement a comprehensive protection strategy tailored to your specific business needs.

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