Own a business

Article last updated: 20/05/09

Are you ready to venture into business? Operating a business is not just about working for yourself, it’s also about having the necessary management skills, industry expertise, technical skills, finance and of course a long-term vision to grow and succeed.

It’s important to consider whether you really understand what’s involved and whether you’re suited to self employment.

Many small businesses rely on the principal to generate income. A serious injury or illness to this person can temporarily prevent the business from generating an income. However, your business expenses will need to be paid if the business is to survive.

Without adequate financial reserves or an income, the payment of ongoing expenses can be difficult, especially if the person is already dealing with costs associated with illness or injury. If family or friends are relying on the person’s income, further stress will be added.

Be smart about business expenses
Many life insurance companies provide business expenses insurance, which can pay for the expenses that your business would continue to incur should you be ill or injured and unable to work.

Change of ownership and key personal
Where multiple parties are involved in a business, the issue of change of ownership can arise as the result of death, permanent disablement, major trauma, injury or sickness to one of the parties.
Financial support is often needed with the loss of key personnel, to help cope with business disruption one of the best ways to prepare for either risk is to have a clear business succession plan in place.

Debt
In order to facilitate expansion and growth, many businesses enter into credit arrangements. These arrangements entail financial and legal obligations.

If the performance of the business is adversely affected by the death or disablement of a key partner or owner, debts can put the remaining partners, and any guarantors, in a difficult financial position. This can be exacerbated if they do not have the financial resources to meet these obligations.

Insurance
One simple way to protect members of your business, including guarantors, from the risk of a business principal dying or becoming disabled, is through insurance. The type of plan you implement will depend on your business, its debts and other factors.

To ensure you have the right plan in place, it is important to seek the advice of a suitable business specialist.