Businesses usually arrange insurance for damage to tangible things such as premises, stock or equipment, and may even have plans in place for how to continue running after a flood or fire damage. However, the importance of key owners and staff is often overlooked, and can have disastrous consequences for a small business.
For example, if you or one of your business partners suddenly died, or became critically ill and wanted to leave the company due to their condition, would the remaining members have sufficient funds to buy their share of the business from them or their beneficiaries?
In most cases, when one of the members of an LLP dies, their interest in the business is likely to pass directly to their family. If there is no membership agreement, statutory rules state that their personal representatives are not permitted to interfere in the running of the business but are entitled to receive everything that the deceased member would be receiving. If a membership agreement exists it will override statutory rules.
If the deceased held a majority interest in the LLP, the remaining owners could lose control of some or all of the business, and may have to work with, or pay a share of the profits to, members of the deceased’s family, who may insist on taking an active role in running the company. If their ideas and views are not aligned with the other members, or they don’t have sufficient expertise, this could lead to conflict, threatening the ongoing success of the firm.
Further problems could arise if any of the deceased’s family wants to sell their inherited interest; if the remaining owners can’t raise the funds to buy it, it could be sold to a competitor. Alternatively, if a buyer can’t be found, the family could suffer financial hardship at an already difficult time.
Members Protection LLP offers peace of mind that, on the death or critical illness of a member of the LLP, the future stability of your business would be safeguarded, by providing the surviving members with the necessary funds to buy the deceased or ill owner’s interest in the business.