10 Risk Management Tips for Entrepreneurs

1. Risk Avoidance
– Think about all possible risks and have a solution in place for each one
– This should be done in your business plan
– Check it every year
– Have an accountant who is an advisor
– Get a CA who can answer all of your questions
– Taxation planning is done before tax time
– Don’t piss off the government, e.g. remit payroll on time

2. Insurance Basics
– #1 rule of insurance is that you can’t get it when you need it
– If you save money here, it is because you are a gambler
– Have an insurance advisor who is a broker
– Know what you are getting – have underwriting done in advance, not later
– Price is not everything, definitions are key

3. Risk Your Business, not Your Home and Retirement
– Have business liability insurance and/or incorporate
– You will have money if someone sues you
– Don’t want to spend years in court
– This limits your liability to just your business assets
– Can save you in a lot of money in taxes, if you are profitable (18.62% for under $400K in net income)

4. Have Protection for Partnerships
– Have a buy-sell agreement for a partnership and the funding for it in case of disability or death
– Many partnerships have agreements to buy each other out in the event of one partner’s death or disability, but what good is such an agreement without the money to buy?
– If one of you should get sick, the other one will have to carry the other one (possibly indefinitely)
– If one of you should die, you may be in business with the other person’s spouse, children, or ex-spouse

5. Insure Your Ability to Earn a Living
– Have disability insurance to protect you and your family in case of accident or sickness
– Your greatest asset is your ability to earn a living – insure it!
– Get as much personal disability insurance as you can get (to replace your income until age 65), if you can get it (tough in the first couple of years)
– Get the return of premium rider – 70% money-back guarantee if you can afford it
– Get business overhead expense insurance, so your business will still be there when you get back

6. Protect Yourself from Critical Illnesses
– Have personal critical illness insurance to protect yourself from Cancer, heart disease, etc…
– It’s a fact that one out of every three Canadians will contract a life-altering illness during his or her lifetime, and with today’s advances in medical science, the chances of you surviving it are greater than ever. Make sure that your finances survive too.
– Get a critical illness insurance policy (lump sum tax-free payment if you survive one of 24 critical illnesses)
– Have a separate, cheaper critical illness policy to cover you for health expenses around the world

7. Hire and Keep the Best
– Have a group employee benefits plan for you and your workers
– To grow, a company must recruit and retain top-notch management talent. How do you get them and how do you keep them?
– Have a health and dental plan in place (from simple to cafeteria-style)
– Have a group RRSP plan in place

8. If it all Rides on One Person
– Have key person insurance if you rely on someone heavily
– It protects your company’s solvency in the event of losing a key employee or founder
– If you depend on a great salesperson or a great manager for a large share of your sales or for credit with your lending institution, you had better insure them
– Insure for disability or death

9. Invest in Creditor-Proof Investments
– Segregated funds are just like mutual funds, except they also offer guarantees on principal while alive (75% of your invested capital will be returned on maturity, which is usually 10 years), a 100% guarantee on death, and potential creditor protection whether you hold them inside or outside of your RRSP
– You have the right to put extra funds into a life insurance policy, which can grow tax free and be used for your retirement or as an inheritance, and it is also creditor proof

10. Leave Your Business to Your children
– Have life insurance if you want to pass your business onto your children
– If you have built up a great enterprise, then on the day you die, you may owe hundreds of thousands or even millions of dollars to Revenue Canada. They don’t want bricks and steel, they want cash.
– You can use a life insurance policy to grow the money needed to pass on your business tax-free to your children

Suzy Dickstein
Financial and Insurance Advisor
Independent Financial Concepts Group Ltd.
20 Holly Street, Suite 207
Toronto, ON M4S 3B1

Phone: (416) 737-0091
Fax: (416) 486-4061
E-mail: sdickstein@ifcg.com
Web: >www.ifcg.com

“When you want all of your questions answered”

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