Be concerned about your business partners

It is surely difficult enough to concern ourselves with our own estate and risk planning, let alone worrying about our business partners.

But concerning yourself with your business partners will be more beneficial to you than you realise. The main focus will in most instances be on the success of the business, but the focus is also mainly driven by the presumption that tomorrow will in all likelihood not be materially different than today.

You should ask youself what if an unplanned event occurred, could you have made a difference by concerning yourself about your partners’ planning?

Scenario 1:

• Your business partner unexpectantly passes away in an accident.
• There is no buy and sell agreement or life insurance in place between the partners
• The partners’ wife is the sole heir of his estate, which will include his shareholding in the business.
• Your deceased business partner’s wife now becomes your new business partner.

Scenario 2:

• Same as scenario 1, but your partner does not have a will. In this instance, your new business partners could be your old partners’ wife as well as his/her children.
• In both scenarios you could offer to buy them out if you have the available cash reserves and they are willing to sell, but at what price?
• Here you will need to start dealing and negotiating with parties you never had to, such as lawyers, executors, wives, children etc.

Scenario 3:

Over and above the 2 scenarios, your business partner might be the main shareholder and the banks may recall some of the facilities. This will undoubtedly place enormous strain on the cash flow of the business and will surely affect your own asset value and livelihood.

If we change the scenario’s around, it will be your business partner who is affected and your own family will be in a position which they wish they hadn’t been in.

If you are concerned that your business planning is not up to date or might have some exposure, ask the questions and obtain expert advice. It is always easier to plan well, than to attempt to fix a very difficult scenario.

Jacques Hodsdon – MCom Tax | CA(SA) | CFP ® is a Director of Affluence Group and specialises in Investments, Personal and Business planning
For enquiries contact, jacques@afgroup.co.za or 082 301 1332