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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.
More about the problem>
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.
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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.
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Each stockholder is insured for the amount of stock interest owned, the insurance being owned by either the corporation or the other stockholders.
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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.
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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,
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Tennessee - TN,
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Vermont - VT,
Virginia - VA, and
Wisconsin - WI.
Not all insurance products from all insurance companies are available in all states.
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