One of the most widely talked about issues with business owners is what happens if one of the owners dies. However, a large number of small businesses do not have proper planning in place. A buy/sell agreement that is funded can provide the business owners and their families peace of mind. However, if there is no business continuation plan in place, a business will face many challenges to even continue when the owner passes away. It’s critical that business owners change the fate of their business by creating a comprehensive plan.
3 ways life insurance helps:
- Safeguards the continuation of your business beyond its present owner(s)
- Ensures the business will be able to sell for the required price
- Continues to give income to a spouse or heirs
When a properly funded buy/sell agreement is put in place, an insurance policy is taken out on the life of the owner by: the business, a fellow shareholder, partner, potential buyer, or heir. Following the owner’s death, the policy furnishes funds to buy the business, and money goes to spouses or heirs.
There are many ways to design a buy/sell agreement and each business will require its own plan. We will be back soon with details on the different types of business that can use buy/sell agreements.