Think Business Protection, Think Longhurst

Longhurst Limited

5th September 2018

Think business protection – Think Longhurst


This article forms a two-part series where I explore business protection, and specifically ‘human insurance’ for the business owner and their key employees.




What is a sole trader?

  • This forms the simplest form of business structure;
  • A sole trader is in business on his/her own on a self-employed basis – although they may employ others;
  • The sole trader owns and controls their business and has unlimited personal liability for any debts incurred by the business;
  • Crucially, the business has no separate legal entity distinguishable from the individual managing it;
  • Legally a business ‘dies’ upon the death of the sole trader. There may be scope for the business to continue to trade – but this would be in the hands of a new owner.


Business Protection for the Sole Trader

The principle of key person cover – providing a cash injection to the right person at the right time – still applies to sole traders. As the business would pass to the sole trader’s dependents on death, the need for cover may not be immediately obvious. But there may be some compelling reasons to recommend it such as:

  • A serious cashflow problem could arise in the event that the sole trader suffers a critical illness and is no longer able to work, threatening the future of the business;
  • If the business ceases to trade on death or critical illness of the owner, a lump sum or regular income can compensate dependents for the loss of future profits;
  • The family could be left with a significantly depleted inheritance. While a sole trader’s business passes on death to their dependents, so do any debts which would need settling out of the estate;
  • Probate isn’t normally granted until any inheritance tax is paid;
  • Until probate is granted, the personal representatives won’t be able to access the business bank accounts to cover any immediate commitments such as outstanding salaries or supplier’s costs;
  • A sole trader may wish to pass their business on death to a non-family member, such as a long-standing employee. Life assurance can provide the funds to do this and compensate the family.


Setting up cover as a Sole Trader

  • Cover should be set up on a personal basis with the sole trader taking out a policy on their own life;
  • It should then be placed it in a suitable non-business trust for their intended beneficiaries;
  • Should cover be required on the life of a key employee, the sole trader would apply for the cover on the life of the employee. This could provide funds to recruit a replacement or meet other costs resulting from their loss.


Next steps

If this article raises further question for your business, and your situation, contact me.

All discussions are confidential and held at my expense. We can talk through any concerns you have, and then go to market to obtain no-obligation quotes.

Nice and easy, and very quick.


Part two of this series focusses on Business Protection for Limited Companies.

Think Business Protection, Think Longhurst.



Chris Broome FPFS is owner and Chartered Financial Planner at Longhurst. Longhurst are a firm of lifestyle financial planners and independent financial advisers based on Silverstone Park and member of the STC. They advise business owners, executives, and management across the UK.

We’re also the folks behind Inside Silverstone business podcast, so get in touch if you’d like to appear on it!





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