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Overview of Business Protection
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Keyman
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Partnership
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Shareholder
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Why
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A cash injection into the business after the death or critical illness of the Keyman. The money may be needed for recruitment, retraining, loss of profits etc
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To provide a sum of money to the remaining partner(s) to enable them to buy the shares from the deceased partners estate
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To provide a sum of money to the remaining shareholder(s) to enable them to buy the deceased shareholders shares from his/her estate. This enables the surviving shareholders to retain control over the business and gives the estate cash rather than shares
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How Much Cover
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Loan Values, and/or loss of profits to the company
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Perceived value of share in Partnership
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Perceived value of Shareholding
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How set up
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Company takes out policy on a ‘Life of Another’ basis
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Life Policy on Own Life in trust for the benefit of the remaining partners. Written under a Cross Option Agreement
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Life Policy on Own Life in trust for the benefit of the remaining shareholders. Written under a Cross Option Agreement
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Who Pays
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Company
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Partner
Drawings can be increased to cover premiums
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Shareholder
Income can be increased to cover premiums
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Tax Treatment
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Generally tax relief received on premiums. Proceeds taxed as a trading receipt. If to cover loan then NO relief and taxed as a capital receipt
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Premiums DO NOT attract tax relief. Proceeds are not taxed as they are from a normal ‘own Life’ Policy
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Premiums DO NOT attract tax relief. Proceeds are not taxed as they are from a normal ‘own Life’ Policy
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