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Business Buy Sell Agreements
A will for your
business! |
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Business Buy Sell Agreements funded with
Term
Life Insurance can
help fund and ensure a smooth
business transfer!
Buy-Sell Agreement Types
The Buy/Sell Agreement funded with life insurance
Buy/sell agreements funded with life insurance become an
immediate source of money for a surviving business partner
to buy the deceased person's business interest. Life
insurance policies used in this way are also generally
called business continuation
insurance. The use of life
insurance in this manner helps the business to continue as
usual.
With a "partnership buy/sell
agreement" any surviving
partners will purchase the portion of a business owned by a
deceased partner. The agreement includes the purchase price
of the deceased person's interest in the business. The
agreement should include a guarantee to ensure money is
available at the time of loss. Life insurance is the perfect
method to guarantee availability of the money.
Cross-Purchase Agreements with Life Insurance
With
the use of a "cross
purchase buy-sell agreement" each
partner purchases a separate life insurance policy on every
other partner's life equal to the amount needed to buy a
share of the partner's interest at death. In a three-partner
arrangement each partner would buy two life insurance
policies covering each of the other two partners. In this
manner each surviving individual partner would use the
proceeds to purchase the deceased partners business
interest.
Entity Purchase Agreements with Life Insurance
With
the use of an "entity purchase buy/sell agreement" the
business owns the life insurance policy on each partner. So,
in contrast to the "cross purchase buy-sell agreement",
where it would take six life insurance policies to cover the
three partners, the "entity
purchase buy-sell agreement" would only require
three life insurance policies. The business would own the
policies instead of the partners, thus at the time of death
of a partner the business (entity) would pay the proceeds to
the deceased heirs instead of the individual partners.
Corporate Stock Redemption with Life insurance
Closely held corporations are much like partnerships. They have stockholders rather
than partners. With a closely held corporation, the stock is
held by a select group rather than being made available to
the public. In this case, the corporation would purchase the
life insurance policies on the lives of the stockholders and
own the policies. At the time of death of a stockholder, the
corporation would receive the insurance policy proceeds and
the use these proceeds to purchase the stock from the
deceased heirs.
Note:
The intent of
this article furnished by
termlifeamerica.com
is to inform and motivate the general business public into
action. One should consider only a qualified
practicing legal individual or entity; in the state in which
you reside for qualified business-planning advice.
TermLifeAmerica.com-
Lewis Fink is licensed as an insurance agent offering Life
Insurance in the following states:
Alabama - AL,
Arkansas - AR,
California - CA,
Colorado - CO,
Connecticut - CT,
Delaware - DE, District of Columbia - DC,
Florida - FL,
Georgia - GA,
Idaho - ID,
Illinois - IL,
Indiana - IN,
Iowa - IA,
Kansas - KS,
Kentucky - KY,
Louisiana - LA,
Maine - ME,
Maryland - MD,
Massachusetts - MA,
Michigan - MI,
Mississippi - MS,
Missouri - MO,
Montana - MT,
Nebraska - NE,
New Mexico - NM,
New Jersey - NJ,
New York - NY,
North Carolina - NC,
North Dakota - ND,
Ohio - OH,
Oklahoma - OK,
Pennsylvania - PA,
Rhode Island - RI,
South Carolina - SC,
South Dakota - SD,
Tennessee - TN,
Texas - TX,
Utah - UT,
Vermont - VT,
Virginia - VA, and
Wisconsin - WI.
Not all insurance products from all insurance companies are available in
all states.
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