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 Business Continuation
Closely Held Corporations: Corporate Buy Sell Agreements
Business continuation of a closely held corporation almost always requires a corporate buy sell agreement.
Business Continuation: The Problem Explained The death of a stockholder does not legally dissolve a closely held corporation. Problems make the retirement of the deceased's interest in a closely held corporation a necessity. A Corporate Buy Sell should always be considered.
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The Solution A properly drawn buy-and-sell agreement financed by life insurance. Definition A buy-sell agreement binds either the surviving stockholders or corporation, to purchase the stock of the deceased stockholder at a prearranged price set forth in the agreement and obligates the estate of the deceased stockholder to sell his stock to the surviving stockholders or the corporation. § As in the case of the partnership agreement, each stockholder's interest is valued at the time the buy-sell agreement is drawn up and periodically revalued. § Each stockholder is insured for the amount of stock interest owned, the insurance being owned by either the corporation or the other stockholders. § Upon the first death among the stockholders, the life insurance proceeds are used by the corporation or surviving stockholders, purchase the stock of the deceased from his or her estate. § The business future of the survivors is assured and the heir(s) receives cash instead of a speculative interest.
The Conclusion-
Life insurance is the best means of financing a business transfer Any buy-sell or business continuation agreement is dependent upon the accumulation of a cash sinking fund. Any buy-sell or business continuation agreement is dependent upon the accumulation of a cash sinking fund.
Analysis will show that all other available financing arrangements are likely to be unreliable and inadequate. § The fact that the plan must produce the prearranged amount of cash at the time death calls for a fund. § An accumulating sinking fund requires time at an assumed rate of interest, to reach a stated amount. If death of the stockholder or partner occurs early, little would have been accumulated.
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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.
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