Business Protection Decision Tree

This Decision Tree will provide you with VitalityLife's business protection solutions based on business type, purpose of cover and the person being covered.

Alongside the Key Person Cover and succession solutions, we include details of how to calculate the amount to be insured, the relevant VitalityLife Business Protection Trust and Option Agreements, how they work, how to implement them and their tax implications.

We recommend using this tool with an authorised Business Protection adviser.

VitalityLife accepts no responsibility for the accuracy or completeness of the information contained in this tool. It contains general information only and is not intended as a substitute for specific advice. We make no recommendation and accept no responsibility that the VitalityLife Business Protection Plan is suitable for any individual or business requirements; for a full explanation of the features of our Business Protection Plan and further information on the suitability of the Plan, please speak with an adviser authorised to sell VitalityLife’s Business Protection Plan.

Business Type

This tool has been designed to help you decide which Business Protection solution best suits your needs. To begin please select your business type.

Sole Trader

A 'sole trader' or 'sole proprietor' means a business that is owned and controlled by one person who takes all the decisions, responsibility and profits from the business that they run.

Although most sole traders will be relatively small businesses, many will have employees, who in some cases, may also be “key”. Therefore the life of an employee who is key to the continuation of the business should not be overlooked. This is otherwise known as Key person Cover.

Limited Company

The Companies Act 2006 describes a company limited by shares as “a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them”. So, the owners of the company are the shareholders.

To manage the company, the shareholders appoint directors. There must be at least two directors for a public limited company, and at least one for a private limited company. The directors do not necessarily have to be shareholders themselves, although in small companies it is usually the case that they do own shares. In many cases all the shareholders are also directors.

A limited company has a separate legal identity, distinct from the individuals who own shares in the company. This also applies for tax purposes; a company is subject to corporation tax on its profits and gains. Shareholders take their profits by way of dividends and directors and employees are in turn taxed on the remuneration they receive.

Each company must have legal documents which are called the Memorandum and Articles of Association.

Limited Liability Partnership

A limited liability partnership (LLP) is a form of partnership that has evolved in response to a desire to limit the business liabilities of the partners but where a corporate structure is inappropriate or impossible due to the rules of, say, a professional body. It is therefore common to see this structure in the accounting and legal professions.

Under the Limited Liability Partnership Act 2000 it has been possible to incorporate an LLP with effect from April 2001. An LLP has a separate legal persona – like a company – and this brings with it the ability to contract in its own right. However, the members of an LLP (as they are called) are taxed as a partnership - that is, all profits, drawn or not, are taxed on the members as trading income in accordance with their profit sharing provisions.

The fact that an LLP can enter contracts means that it can effect Key Person Cover cover in its own name. The business succession needs, on the other hand, will normally be provided for in exactly the same way as for partners in conventional partnerships.

Partnership

The Partnership Act 1890 defines a partnership as “the relationship which subsists between persons carrying on a business in common with a view of profit”.

Partnerships may vary in size, from as small as two people with no employees, to large accountancy practices with hundreds of partners and staff.

Each partner will have two financial interests in the business - an entitlement to a proportion of the profits of the business and an entitlement to capital. Capital will include any goodwill in the business. Goodwill is an intangible asset which reflects the relationship of the business with its customers and its good name as a business In most cases, the percentage entitlement of each partner will be the same for both profits and capital but this does not necessarily need to be the case. Regardless of the size of the undertaking, similar financial responsibilities and obligations apply to partners.

In England a partnership (except for a LLP) does not have an individual legal identity distinct from the individuals who constitute the partnership.

From a Key Person Cover and succession standpoint there are some very specific issues to consider when dealing with partnerships. Key Person Cover cover can’t be effected by the partnership, except in Scotland, where Scots law partnerships have what is known as a separate legal persona and, thus, contractual capacity. All tax rates are 'personal' tax rates and liability is, substantially, unlimited.

Select Business Type

Sole
Trader

Partnership

LLP

Limited
Company

Cover purpose

Key Person Cover

This provides financial protection for the sole trader following the death or serious illness of the owner or a key employee.

Ownership Protection

This provides a business share purchase or financial compensation in the event of the sole trader dying or becoming seriously ill.

Death in Service Benefits

This provides in service benefits for employees.

Select cover purpose

Key Person Cover

Ownership Protection

Death in Service Benefits

Who would you like to cover?

Employee

Sole Trader

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
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Automatic accrual: {% Accrual %}
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Email my report

Loan Protection?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Business to continue on death?

Yes

No

Business to be passed on?

Family Member

Employees

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Who would you like to cover?

Employee

Sole Trader

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Cover purpose

Select cover purpose

Key Person Cover

This provides financial protection for the partnership following the death or serious illness of an equity partner, a salaried partner or other key employee. This is otherwise known as Keyperson Cover.

Ownership Protection

This provides business share purchase or financial compensation in the event of one of the partners dying or becoming seriously ill.

Death in service benefits

This provides in service benefits for employees.

Key Person Cover

Ownership Protection

Death in service benefits

Who would you like to cover?

Partner

Equity partner

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Are you looking for loan protection?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Is this a family business?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Do you require automatic accrual?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Who would you like to cover?

Employee

Partner

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Why do you require cover?

Key Person Cover

This provides financial protection for the LLP following the death or serious illness of an equity member, a salaried member or other key employee. This is otherwise known as Keyperson Cover.

Ownership Protection

This provides business share purchase or financial compensation in the event of one of the members dying or becoming seriously ill.

Death in service benefits

This provides in service benefits for employees.

Select cover purpose

Key Person Cover

Ownership Protection

Death in service benefits

Who would you like to cover?

Employee

Member

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Are you looking for loan protection?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Is this a family business?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Do you require automatic accrual?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Who would you like to cover?

Employee

Member

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Why do you require cover?

Key Person Cover

This provides financial protection for the company following the death or serious illness of a shareholder, director a key employee. This is otherwise known as Keyperson Cover.

Ownership Protection

This provides business share purchase or financial compensation in the event of one of the shareholders dying or becoming seriously ill.

Death in service benefits

This provides in service benefits for employees.

Select cover purpose

Key Person Cover

Ownership Protection

Death in service benefits

Who would you like to cover?

Employee

Shareholder

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Are you looking for loan protection?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Company Purchase

In some limited companies there may be provisions for the company itself to purchase the shares of the deceased shareholder. If that happens, the shares that have been purchased are cancelled and the shareholdings of the remaining shareholders are proportionately increased.

We recommend that you review both the 'Yes' and 'No' solutions in this tool.

Is this a company purchase?

Yes

No

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Who would you like to cover?

Shareholder

Employees

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

Summary

Business Type: {% businessType %}
Cover Purpose: {% coverType %}
Family Business: No
Edit
Automatic accrual: {% Accrual %}
Edit

Email my report

VitalityLife is a trading name of Vitality Corporate Services Limited. Registered number 05933141. Registered in England and Wales. Registered office at 3 More London Riverside, London, SE1 2AQ. Vitality Corporate Services Limited is authorised and regulated by the Financial Conduct Authority.