Business Owners

Ensuring the long term success of your business and protecting it from financial risk can be challenging.  There are many complex situations you should consider in order to provide security for your business.  Whether your business is small or large, First Financial Group can help you plan for the unexpected, take advantage of tax benefits and attract the best employees with enticing compensation packages.

Some items to address include:

Key Person Insurance – should you, a partner or another key employee not be able to work due to serious illness, disability or death, key person insurance will provide your business with a tax-free benefit to help minimize the impending disruption.  Replacing a key employee can be time consuming and costly and the resulting effect on profits may weaken the financial stability of the business.  In the absence of proper planning, the survival of the business may be affected by the death of a business owner or key employee.  Key person insurance provides assurance to a small businesses’ creditors and employees that the business will continue even if a key person dies. In this situation the life insurance proceeds would provide immediate cash to offset business needs such as outstanding lines of credit and employee payroll to assist during the transition period.

Business Loan Protection – if your business requires a loan, creditors will often require the business owner to personally guarantee it.  the death of the business owner or another key executive may cause creditors to demand immediate repayment of outstanding business debts.  this can place a significant financial burden on the business at  time when business results may already be severely impacted by the death.  if effective planning hasn’t taken place, the business may not survive the owner or key persons death.  a solution is for the business to purchase an insurance policy on the life of the owner and other key employees.  Proceeds from the life insurance policy are tax free and may be used to pay down the outstanding business debts.

A creditor may also require a small business to purchase collateral life insurance to protect that creditor’s interest, particularly if the death of a business’s owner could affect the value of business assets used to secure the debt.  If a life insurance policy has been collaterally assigned to a restricted financial institution, a portion of the premiums may be tax deductible to the business.

Buy/Sell Funding – A key component of a business’s financial plan is planning for succession.  Ensuring you have an effective buy/sell agreement in place will help you avoid possible business disruptions.  One of the most effective ways to fund a buy/sell agreement is the use of life insurance.

Typically, business partners will want to ensure that if one partner dies, the other partners will be able to purchase the deceased partners shares from the heirs or estate and continue operating business without interruption.  Absent an effective buy/sell agreement and funding arrangement, the deceased partners shares could flow through his or her estate, resulting in potentially disastrous results.

As one of the leading independent insurance advisors located in Toronto, First Financial Group will assist you with your unique insurance needs and circumstances.  For further information please contact us.