Chapter 10.2- Business Protection Flashcards
What is key person insurance
Market for life assurance
When is there a need for kpi
If loss is likely to leD to serious financial detriment to the business
What are the key considerations for calculating g kpi cover
Present cash position Level of profits in recent past and projections Effect of profits Cost of. Recruiting Loans that could be recalled
What are the 2 methids used for calculating kpi
Multiple of salary
Proportion of profits formulae
What are the common factors used j. Multiple of salary calculations for kpi
5-10
What is the proportion of profits formulae
Key person salary X profit last year X no of years to replace / total salary bill
In what circumstances will premiums be admissible deductions and sums received as trading receipts on kpi
If sole relationship is that of employer and employee
If insurance intended to meet loss of profit
If annual or short term insurance
What are the potential suitable policies for kpi
Term assurance
FlexibleWOL
What is share protection insurance
Provides funds to buy. Company shares if a shareholder dies or becomes seriously ill
What type of company is share protection intended for
Plc
What are articles of association
Basically a company’s will
What are the 3 key elements for share protection
An agreement on how to transfer shares
Insurance to provide funds
Documentation so can receive funds free of tax
What 3 things must be considered to reach an agreement for share protection
Recommendation must be compared with articles of association
Must be prior agreement for how to calculate share price
Ensure IHT brp continues
How does a buy and sell agreement work for share protection
All shareholders enter an agreement to say their heirs must sell the shares and surviving shareholders must buy them
What is the benefit of a buy and sell agreement for share protection
Everyone knows what will happen
What is the major downside of a buy and sell agreement
IHT bpr is lost
What is across option agreement
Each party has the optio to sell buy within specified time period
What is and automatic accrual agreement
Shareholders leave shares to other shareholders in their will or complete automatic accrual agreement which does the same thing
What are he downsides of automatic accrual agreements
Growth may exceed value of polivy
Could be IHT liability
Shareholder could change will without telling other shareholders
How can the policy be written for share protection
Life of another if buy and sell agreement or own life in trust for benefit of co directors
What kind of trust should be used for share protection
Flexible to accommodate potential change of shareholders
How are premiums for share protection treated if company pays
Subject to both it and NICs
According to the partnership act 1890 what happens to a partnership if a partner dies without partnership agreement
Automatically dissolved
What will each partner have in event of dissolution of partnership
Capital account and share of business
What should be included in a partnership agreement
What should happen if partner dies to prevent business dissolving
What agreements can be made for partnership business interest
Buy and sell
Cross option
Automatic accrual
What policy should be taken out in cross option agreement for partnership business interest protection
Own life index linked term assurance written in trust
