Buy-Sell Agreement

Using insurance to fund a buy sell agreement is a smart business decision.

Planning for the loss or disability of a business owner or partner with a buy sell agreement and insurance is crucial to ensure the continuity of your business and protecting the financial interests of each co-owner’s family. The agreement stipulates, who will purchase the shares of the deceased, What is a fair price for their shares in the business, Where will the funds come from to purchase the shares.

Insurance is the most cost-effective way fund a Buy-Sell agreement. A life or disability insurance policy on each co-owner or partner is purchased and the proceed is used to buy the interest of the deceased or disabled partners.

Buy-Sell Example

Ken and Melinda are partners in a firm; If Ken pass away, his shares in the company would be passed on to his daughter Sabrina who has no interest in running the business. A buy-sell agreement will ensure that Melinda attain full control of the company. It also assures that Sabrina will receive a fair price for her shares.

Where will the funds come from?

The funds provided by the insurance proceed will be used to purchase the deceased shares. This ensures that the company does not have to sell its assets to buy the shares of the deceased partner.