When you co-own a business with someone, one of the first things you have to hammer out is what happens if one of you is no longer able to work? It could be a death, an injury from an accident, some medical condition, or even just wanting to move on to the next thing. What happens to you and your families when that happens? This is where the buy–sell agreement comes in.
First and foremost, what is a buy–sell agreement? It’s a written agreement between co-owners about what’ll happen to said ownership if one of them dies, retires, or has to leave the business. A good comparison is to think of it as a will for the business like you’d have a will for a loved one; it decides who can buy the departing owner’s interest, when, and at what price.
The life insurance aspect is what usually helps fund this agreement and gives a payout to the owner’s family, since without a steady place to draw funds from, you often don’t have the funds for a buyout and compensation. Ideally, this changes nothing about daily life.
A buy-sell life insurance agreement is meant to be a contingency plan that only comes into play when a triggering event happens. These can be any of the reasons mentioned prior, and it’s at that point when valuations and buyers come into play. You should have a plan lined up and agreed upon before any of this happens, so it’ll tell the remaining owners or the company to purchase the departing owner’s shares according to a formula or valuation.
Having a well-crafted plan in place makes sure that all your bases are covered, so your families can rest a bit easier if something unexpected and tragic befalls you. If you want to learn more or just want to see what options are available, contact us at 866-811-0737 or at https://crossroadsinsurancegrp.com/.