Several events significantly mark our lives. The birth of a first child is, without a doubt, at the top of the list. Leaving the comfort of a job insured for life to become an entrepreneur does not come far behind. Here is the story of Réjean who decided to say "Bye Bye Boss".
A childhood dream
Since his childhood, Réjean has been having fun with a soldering iron to repair many small objects in the house. Quickly, two of his friends, Paul and Étienne shared his passion, so to speak.
Now 35 years old, married, father of two children, Réjean works as a welder for the Société de transport de Montréal. During a friendly meeting, the three friends concretized the project of founding a company, "Les soudures des Laurentides". Paul would act at the marketing and sales level, Étienne, administrative management and Réjean, operations. Thanks to his expertise at the STM, Étienne had identified a few clients ready to do business with him.
Getting it right
The three friends consult a lawyer to prepare an incorporation and an agreement between partners. A room is rented, the houses given as collateral to the bank to obtain a line of credit, the equipment is bought thanks to a bank loan, the first customers signed... everything is going well.
The first glitch occurs
After a year of work, Paul has a cardiovascular accident and will not be able to work for the rest of his life. The agreement between partners provides that the other two partners must buy back its shares. Where will the money come from to do it? End of a beautiful dream?
Go into business while protecting yourself and your family
The agreement between partners aims to define the roles, obligations and especially the responsibilities of each of the partners towards each other.
After the lawyer and possibly the accountant, the financial advisor will give you valuable advice to minimize the financial consequences of certain events.
Share buyback insurance
You can take out share buyback insurance in the event of total disability or the death of one of the partners who will finance this operation. A lump sum will be paid to the company if one of the partners becomes disabled or dies.
This type of policy helps to finance the situations of redemption of a partner as stipulated in the agreement. Thus, the equity of the company and the partners will be little or not put to use.
Insurance on partners
Regardless of the situation described in the previous paragraph and even if there is no share buy-back clause provided for in the agreement, the company can take out insurance "on the heads of the partners".
If one of the partners dies or becomes disabled for a long period of time, his absence will cause significant problems for the company. The latter may take out, for its benefit, life insurance and/or disability insurance and/or serious health insurance on the heads of its partners. The profit will be paid to the company.
This cash inflow is intended to help the company recover from this major event.
If a key employee, partner or owner becomes disabled for a significant period of time, is diagnosed with a serious illness or dies, the company will suffer the repercussions of this situation.
Business loan insurance will cover payments on insured loans or lines of credit. It thus makes it possible to protect the personal insurance of the partners, reduces liquidity problems and facilitates the normal continuation of the activities of the companies.
Your advisor can also help you, in this time of labor scarcity, attract and retain new employees.
If you go into business, call one of our financial advisors. The safety of your business, yourself, your wealth and your family is at stake.