Partnership Insurance

What Is a Partnership?

A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.

There are two types of partnership arrangements. In a general partnership, all partners share liabilities in unlimited manner and profits equally or depending on their share in partnership. In other type of partnership, say LLP, partners have limited liability depending on their share in that business. Partnerships may also have a "silent partner," in which one party is not involved in the day-to-day operations of the business.

The type of partnership that business partners choose will depend on how they want to manage day-to-day operations, who is willing to be financially liable for the business, and how they want to pay taxes.

Business partnerships are forged on years of mutual trust, collaboration and friendship. However, there comes a time when both partners need to consider the future of their business and partnership in the absence of the other.

The passing of a business partner can be incredibly distressing and traumatic to the other party. Moreover, it can jeopardise the financial security and stability of the partnership, as the remaining partner(s) will require to

1. Involve the Family of deceased partner in business.

2. May Family of deceased partner not as comfortable with remaining partners.

3. May Family of deceased partner want to sell their share

and then

a significant sum of money is needed to buy out the deceased's share of the company/firm.

What is Partnership Insurance?

Partnership insurance is a business protection insurance product purchased by business partners to secure their business against events like death or critical illness that can occur to the parties involved.

It provides compensation to the surviving business partner(s) as a lump sum amount on the death of the other insured partner. This allows surviving partners to buy out the deceased's share of the company from their next of kin. If family of deceased is not interested in selling their share, company/firm will be cash rich.

How Does Partnership Insurance work?

All partners sign a dead and buy life insurance (term insurance) for every partner. Insurance depends on individual share in the firm and value of the firm.(market value and goodwill, everyone in a certain ratio)

Proposer is firm. Premium will be paid by firm. Premium will be shown as business expense in book of accounts u/s 37(1) of income tax act.

So, Beneficiary is also the company/firm.

Benefits of Partnership Insurance

Financial Stability: Provides required funds to the remaining partner/s to pay for the share of the deceased partner to his family, thereby avoiding any financial strain in case of untimely demise.
Ease and Choice: The deceased partner's family is not obliged to become involved in the business partnership during such crisis.
Peace of Mind: Business partners can rest easy knowing they can retain control of their affairs even during unexpected perils.

Partnership Insurance is a very Important measure to take by every partnership business to safeguard it from any unforeseen event of losing any partner. To know more about Partnership Insurance please contact us on 7973915519 or mail us on licgaganptk@gmail.com