A family business is a great way for your relatives to come together, become self-reliant and create a lasting legacy for all your future generations. And while it may be fun, exciting and more relaxed to run a business with your family than it is to work in another individual’s business, that doesn't mean that you should be lax about your insurance planning.
Liability Exposure Can Sink a Business
When your whole family is in on a business with you, there is no backup plan for financial difficulties that you may face. You are all in this together which means that negative financial events will affect all of you. Liability insurance is one way to ensure that your family's wealth isn't wiped out by the risks taken on by your family business. Consider professional liability as well as commercial auto, general and any specialty liability coverages tailored to your industry.
It’s important that owners of a family business have a formal succession plan in place. It's not enough to know that other family members will take over the business upon your death; you should have a written and financed plan for providing for those family members who no longer wish to be involved when you pass away and those that do. A buy-sell agreement between all partners can ensure that spouses and children who don't wish to become owners of the business will still be provided for and their shares of the business bought out after your death.
There are many different reasons one might wish to open a family business. One popular motivation is to profit from the combined individual talents of various family members. When this occurs, it is often also true that the loss of a family member with a particular skill can hurt the business substantially. A key-person insurance policy ensures that the business gets a cash infusion upon the death of any key employees which will allow the remaining partners the resources they need to keep the business going while they attempt to find a replacement or sell the business.
There is no type of Michigan business insurance policy that a non-family-owned business needs that a family-owned business does not. In addition, family business owners must take added steps to ensure the safety of their extended family units. If you have questions about how to structure the insurance policies for your family business, give us a call at 800-220-5582.