I was watching Better Call Saul on Netflix last night and there was a scene in the episode which might cause a lot of businesspeople to pause for thought (Season 4 Episode 6 at 26 minutes).
The main character in the show, Jimmy McGill aka Saul Goodman, calls in to his recently deceased brother’s law firm, Hamlin Hamlin McGill to collect a cheque for his share of the estate. He finds his brother’s business partner Howard Hamlin sitting in his corner office looking very dejected. Howard explains that the firm isn’t doing as well as it was. It seems that Howard and Chuck were a good team – like many good partnerships their skills complimented each other – Chuck was the great legal brain and Howard was a great sales guy. Now that Chuck has passed on not only has the firm lost its best lawyer, but because Chuck’s estate had to be distributed the firm had to pay the value of his share to the Executor. This starved the business of cash and Howard has had to lay off several staff as a result.
As bad as this sounds this isn’t the worst thing that can happen in this scenario. If Chuck had left his share of the firm to his wife and if she didn’t want to be bought out or if the firm couldn’t find the cash to buy her out, Howard might have found himself with a new business partner, who isn’t a lawyer but who would have a large say in the running of the firm.
If Howard and Chuck had thought of this in advance they could have taken out Partnership Insurance. When Chuck died the policy would have paid Howard the value of Chuck’s share of the business. As part of the process a legal agreement would have been drawn up which would compel Chuck’s wife to sell Chuck’s share of the business to Howard. Howard would end up 100% owner of the business (doubling his wealth), there wouldn’t be any layoffs and Howard could have hired a new lawyer to replace Chuck.
This can apply to any business which has more than one owner. Just insert your name and the word Engineer/Dentist/Hotelier in the above storyline.
If you’re involved in a business with others (be it a partnership or a company) and you’re interested in securing the future of the business and protecting your wealth, contact us on 01 546 1100, or book a 15 minute video call with us here.
© Highfield Financial Planning – originally published 21 October 2018
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