There’s a reason why some smaller UK businesses will fail this year
3 things businesses and their owners should do now
4.8 million businesses operate in the UK according to figures from the Department of Business, Innovation and Skills. SMEs (small and medium enterprises) make up about 99.9 per cent of of all the private sector businesses, employing 14.1 million people.
Many of those businesses will succeed and grow but some will fail. There are numerous reasons why businesses fail, particularly small ones. One cause of businesses collapsing is frequently overlooked; something just as catastrophic as poor cashflow, bad debts, or unaffordable rents.
Every year thousands of people are affected by mental incapacity and many of them are business owners.
Risk analysis is an essential part of the management of all businesses. and some new start-ups will take into account the possibility that one or more of the owners could die. They may take steps to ensure that the surviving owners have access to funds to enable them to buy the shares of the deceased owner(s). Unfortunately, all too often, that is as far as the planning goes. Very few even consider the risks associated with an owner becoming mentally incapacitated, let alone take steps to address the issue.
What should business owners be doing?
Business owners must consider some fundamental steps to protect themselves, their families and their businesses.
1. Set up a Lasting Power of Attorney
If you have lost the mental capacity to make decisions either temporarily or permanently your business could suffer serious problems unless you have a legally authorised individual to act on your behalf. No one knows when mental incapacity might strike. It could be when an important decision needs to be made about the future of the business. Equally, if decisions about the day to day management can’t be made your business could grind to a halt.
Use a Lasting Power of Attorney to authorise one or several individuals to manage your business affairs until such time as you recover capacity or if incapacity is permanent to arrange an orderly exit from the business.
2. Enter into a Shareholders Agreement
It’s vital to ensure that your relationship with your co-owners is properly organised so that the rights of the individual owners can be protected. This is achieved through a Shareholders Agreement or Partnership Agreement.
3. Make a Will
Whether you are a sole trader, in partnership or a shareholder in a limited company you have an interest in a business that is potentially valuable. That value forms part of your estate on death and should be appropriately dealt with under the terms of a Will to ensure a smooth and secure transfer of the value of your business share to your family. Cross-option agreements can help but they are not the whole solution. Making a Will gives you the opportunity to consider inheritance tax and capital gains tax issues and do some tax planning.
Ask us for more information about our asset protection services for business owners. Call 0115 7722129 or click here
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