Tool Box
Issue No. 46 - April/May 2009
How to protect a partnership
by Daniel Lock
What do business owners in a partnership risk if they don’t carry adequate risk protection cover for themselves and their fellow proprietors? The answer is quite simple. Everything!
Australian business owners are renowned for hard work, innovation and determination to overcome problems and establish a successful business. Many businesses commence as, or evolve into a partnership because strength in numbers often outweighs the risk of operating a business as a sole principal; two or more like-minded people can achieve far greater results.
And unlike sole trader structures, partnership arrangements can be set up to share responsibility and authority, giving partners with flexibility to take time away from the business for a vacation even to recover from a short term illness.
A business partner can also:
• Be a highly motivated co-worker
• Provide complementary skills; or
• Contribute capital and funds for business expansion But along with the benefits there are risks associated with partnerships. The death, disability or a critical illness of a partner can not only threaten business profitability but put a firm’s survival in jeopardy as the misfortune triggers an immediate requirement for cash.
Many serious illnesses, such as a heart attack, stroke and cancer, no longer result in death, but do require long periods of recovery and convalescence when the buisness is denied the partner’s income earning activities. How would your business respond to the untimely death, total & permanent disability or a major critical illness of a partner? Would such an event
• Disrupt work in progress?
• Shatter business plans?
• Devalue the business?
• Result in loss of intellectual assets and intelligence?
• Lose business and clients?
• Lose priceless experience?
• Increase pressure from trade creditors?
A Partnership Keyperson strategy, can protect the long-term viabil...
