Protecting Your Business


Steve Richens from Moneta Finance has been helping business owners protect their businesses for over 20 years.  Being based in an active earthquake zone the need to protect your business has never been more relevant and never far from most business owners minds.  In this article Steve talks about the need to protect the business for the day that one of the business partners can no longer work, what can be done to protect the business? 

The New Zealand psyche is to own your own business if you can.   Taking a business partner means you can share the costs, and have someone to work with and bounce idea’s off.

A Partnership or Limited Liability Companies can work very well UNTIL one of the partners dies, becomes critically ill or disabled.

Then, one partner tends to be left holding the can, doing the work and building up resentment that the “disabled” partner is not pulling their weight, or maybe not doing anything, but is still reaping the financial rewards.   Or if they have deceased then the survivor has a new business partner (wife, banker) who knows nothing about the business but perhaps wants an input.   After all, they do have a financial interest.

So how do you combat this in your business?

Answer  –  A simple Buy/Sell agreement.

The way this works is that both or all partners sign to an agreement that says in the event of death, disability etc, the “injured” party will sell their shares in the business to the survivor(s) for a pre-determined amount.

This amount is usually reviewed annually when financials are completed.

One party must sell their shares and the other must buy – and this is normally funded by an Insurance package.

This then benefits all parties.

For example, I  have a 50% share in a business worth $600,000 say.   If my business partner dies or becomes disabled, I probably do not want to be in business with  his wife, children or bankers.   I therefore would like to buy them out, but do not have $300,000 ready cash available.   This is where the Insurance policy will fund the purchase.

Likewise, should I become incapacitated, my partner will not want to carry me, and I or my wife want our money out of the business.

The “well” partner makes a claim on the policy, pays me out my share and I must sell my shares to them.

Outcome, a positive predetermined result for all concerned.

The agreements are pretty easy to put together, but do require your Solicitor to draft them to make sure they are fully functional.

If you would  like to know a bit more about how you can protect both your business and your families interest in your business, then please contact Steve direct on