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The Ultimate Deadline: It Needs A Proactive Approach

Death and Taxes ...

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Only two things are certain in life, death and taxes. But today, you might be surprised to learn that we don't want to talk about tax ...

Everyone knows the phrase 'death and taxes' but what happens to your business when you reach the ultimate deadline?

Everyone knows the phrase 'death and taxes' but what happens to your business when you reach the ultimate deadline?

copyright: kzenon / 123rf

True, many of us have had our minds focused recently on getting our return into HMRC on time, but the certainty we want to talk about today is actually the ultimate deadline. It's an ominous thought, death, and hard to raise without sounding morbid.

However, a proactive business owner does think about it, and they prepare for it too. The problem is, at a time that is particularly distressing to a family, the last thing they want to be worrying about is your business.

The consequences of not making adequate arrangements for what has to happen in the event that you're not around, though, are significant. So, what can you do to prevent this from causing unnecessary worry and concern if it comes to it?

A bit of forethought will make things much easier, so we recommend you consider the following:

  • Ensure you have a will

    With respect to your business, your will needs to state who will receive your shares in your business if you die. This helps to put a plan in place so your business can continue.

  • Arrange appropriate life insurance

    This will ensure there are funds available to the business to continue trading whilst things are being sorted out. We would also suggest that a Death in Service policy is worth considering too.

  • Register a Lasting Power of Attorney

    True enough, this is more with respect to you being incapacitated, but it does mean that someone can step in and make decisions on your behalf for your business. It's worth noting that there are two types of Power of Attorney; one which covers health decisions, and one which covers financial decisions.

  • Put a Shareholder's Agreement in place

    This is actually worth having from the moment you start your business, but if you haven't got one in place yet, we recommend you do so. It may seem unnecessary to begin with, but imagine if your co-shareholder suddenly dies and their spouse inherits their shares and decides to sell them to a competitor ... it's not a good thought, is it?

    There are various factors that need to be considered, of course, not least that the Shareholder's Agreement should tally with the will of the person who has died. One way of ensuring provision doesn't clash is for each shareholder's will to state that the other shareholder can purchase the shares from the deceased's estate. And this leads us to our next point ...

  • Consider Cross Share Options too

    This effectively ensures that life insurance policies are taken out that will make funds available for the other shareholders to purchase the shares as per above.

  • Check your Articles of Association

    This is easy to overlook, but your Articles need to include pre-emption rights. Effectively, other shareholders then have first refusal on shares put up for sale.

On the face of it, we feel we should apologise for raising such a gloomy subject, but in truth, we know it's something that does need to be discussed with every business owner we work with.

I was only at a breakfast meeting last Thursday and an Insolvency Practitioner was describing how on Wednesday he had received a call for help from a company whose owner had just fallen ill and was in no position to run the business and who had no contingency/protection plans in place.

You really don't want to put your loved ones under any more strain than needs be at such a distressing time. By putting arrangements in place now, you are protecting them and your business so those you leave behind can look to the future with positivity.

"Would you like to know more?"

Remember, only two things are certain in life, death and taxes. If you'd like to find out more about how the ultimate deadline could affect your business, do give me a call on 01908 774320 or click here to ping me an email and let's see how I can help you.

Until next time ...

Business Godparent

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More about Roger Eddowes ...

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.