How to Raise Protection With Your Business Partner (Without It Being Awkward)
How to Raise Protection With Your Business Partner (Without It Being Awkward)
If you run a company with someone else, you probably know their coffee order, their kids’ names and how they react when a client lets them down.
But have you ever asked what they’d want to happen if they died or couldn’t work for a year?
It’s not exactly an easy conversation to have over your morning coffee, is it?
The trouble is, putting it off doesn’t make the risks disappear.
Having that conversation now could make a real difference to your business and the people who depend on it.
Why Does Talking About Business Protection Feel Awkward?
Let’s face it, nobody particularly enjoys talking about death, serious illness or what might happen if things go wrong.
And when you’re running a business with someone else, it can feel even more uncomfortable.
You might worry that bringing it up sounds like you’re expecting something bad to happen. Perhaps neither of you wants to suggest spending money on insurance, or you’re concerned the conversation might highlight differences in ownership or responsibilities.
But here’s the thing.
The risks don’t disappear just because you don’t talk about them.
Having an open conversation now means you can make decisions together, rather than leaving someone else to deal with difficult circumstances later.
It’s About Protecting the Business and Your Families
One of the easiest ways to approach the subject is to stop thinking of it as a conversation about death or illness.
Instead, think of it as a conversation about protecting everything you’ve worked hard to build.
What would you both want to happen to the business if one of you couldn’t carry on?
Who would take over their responsibilities?
What would happen to their shares?
And how could you make sure their family was looked after without putting the business under unnecessary financial pressure?
These are all practical questions that business partners should feel comfortable discussing.
After all, you’ve probably spent years building your business together. It makes sense to have a plan for the unexpected.
How to Start the Conversation With Your Business Partner
You don’t need to sit your business partner down for a dramatic conversation!
Sometimes it’s as simple as raising the subject over a coffee.
You could say:
“I’ve been thinking about what would happen to the business if either of us couldn’t work for a long time. Have you ever thought about it?”
Or perhaps:
“I’d like to know that if something happened to me, you wouldn’t end up in business with someone you hadn’t chosen. And I’d want the same for you.”
You could even suggest having an initial conversation with a financial adviser to understand what options are available.
The important thing is to approach it as something you’re working through together.
And ideally, choose a time when you’re both relaxed rather than trying to squeeze it into an already stressful working day.
What Should You Discuss With Your Business Partner?
Once you’ve started the conversation, it’s worth looking at how your business is currently set up.
For example, do you both know exactly what percentage of the company you own?
Does the business have any outstanding borrowing, and have either of you signed personal guarantees?
Are there particular responsibilities, client relationships or areas of the business that depend heavily on one person?
It’s also worth reviewing whether you have a shareholder agreement in place and whether your wills are up to date.
You might be surprised by what comes out of the conversation.
It’s not unusual for business partners to have different assumptions about what would happen if one of them was no longer around.
Finding that out now gives you the opportunity to put appropriate arrangements in place.
Common Objections to Business Protection
Even when business partners understand why protection matters, there are often a few reasons why they put it off.
“We’re too young to worry about that.”
Unfortunately, serious illness and accidents don’t always wait until we’re older.
And younger business owners may have significant financial commitments, particularly if they’re still growing their company.
“It’s going to be too expensive.”
The cost of business protection depends on several factors, including your age, health, the type of cover and how much protection you need.
Rather than assuming it’s unaffordable, it can be worth exploring the options and getting a quote.
“My family would sort everything out.”
Your family might do everything they could to help, but would you really want them making complicated business decisions while dealing with a difficult personal situation?
Having arrangements in place can help make things clearer for everyone involved.
“We trust each other. We don’t need anything in writing.”
Trust is a fantastic foundation for any business partnership.
But circumstances change, and written agreements can help make sure everyone understands what should happen if the unexpected occurs.
It’s not about a lack of trust. It’s about protecting it.
What Could Happen Without a Plan?
Let’s imagine two business partners who each own 50% of a company.
They’ve worked together for years, built a successful business and never really discussed what would happen if one of them died.
Unfortunately, one partner passes away unexpectedly.
Depending on the company’s legal arrangements, their shares may pass to their estate and ultimately to their beneficiaries.
The surviving business partner could find themselves sharing ownership with someone who has no experience of running the company.
Meanwhile, the deceased partner’s family might need access to the value of those shares to support themselves financially.
The surviving partner may want to buy the shares, but where would the money come from?
Suddenly, both sides could find themselves in a difficult position.
This is a hypothetical example, but it highlights why planning ahead matters.
A properly structured shareholder agreement, alongside suitable shareholder protection, may help establish how shares can be transferred and how a purchase could be funded.
The legal agreement itself should be prepared with appropriate legal advice.
When Should You Speak to a Financial Adviser?
You don’t need to have all the answers before speaking to an adviser.
In fact, that’s rather the point!
A financial adviser can help you understand the different types of business protection available and explore which options may be appropriate for your circumstances.
That might include shareholder protection, key person protection or other arrangements depending on how your business operates.
It’s also an opportunity for both business partners to hear the same information, ask questions and understand the potential costs.
Having that conversation doesn’t mean you’re committing to taking out a policy.
It’s about understanding your options so you can make an informed decision.
Agreeing on the Next Steps
Once you’ve had the initial conversation, try not to leave things there.
Agree what you’re going to do next.
That might mean arranging a meeting with an adviser, getting some quotes, speaking to a solicitor about a shareholder agreement or simply reviewing your existing arrangements.
And if you decide not to make any changes immediately, it’s still worth agreeing when you’ll revisit the subject.
Businesses evolve, people take on different responsibilities and financial commitments change.
Your protection arrangements should be reviewed as your circumstances change too.
The first conversation might feel uncomfortable, but once you’ve had it, business protection can become another part of running your company responsibly.
Frequently Asked Questions
What if my business partner doesn’t want to discuss protection?
You can’t force someone to have the conversation, but you can explain why it matters to you and the business.
You can also review your own financial and legal arrangements and revisit the discussion when circumstances change, such as taking on additional borrowing or expanding the company.
Should both business partners have protection?
Often, it’s worth considering protection for both partners because the risks can affect either person.
However, the appropriate arrangements will depend on factors such as ownership, responsibilities and the company’s financial commitments.
Do we need a solicitor for a shareholder agreement?
Yes, you should seek appropriate legal advice when putting a shareholder agreement in place.
A financial adviser can explain the protection options available, but the legal arrangements need to be considered separately.
How long does the initial conversation take?
It doesn’t need to be a lengthy process.
An initial meeting with an adviser can help you understand the main risks, discuss potential options and decide whether you need to explore anything further.
Not Sure Where to Start?
Talking about what might happen to your business if one of you couldn’t carry on isn’t always comfortable.
But it doesn’t have to be complicated.
If you and your business partner have been putting off the conversation, I’m happy to help you understand what protection options might be available and what you might need to consider.
No pressure, no complicated jargon. Just a straightforward conversation about your business.
Talk To O'Malley Financial Services is a trading style of Commercial Connect Limited, authorised and regulated by the Financial Conduct Authority (FCA No. 1021324). This content is for information only and does not constitute financial advice. Policies have terms and conditions and may not pay out in all circumstances. Tax treatment depends on individual circumstances and may change.
