FACTS FROM LINCOLN FINANCIAL GROUP ON BUY-SELL AGREEMENTS
Buy-Sell agreements
Planning for the succession of your business may be one of the most important and critical challenges a business owner will face.
It’s also a great opportunity to ensure an orderly transition upon a triggering event such as the death, disability, retirement, or withdrawal of any of the businesses shareholders, owners or business partners.
A buy-sell agreement is a binding contract that will govern what happens when a triggering event occurs. Additionally, it can contain the terms and fair market value for a buyout of the business interest. As a funding tool for the buy-sell agreement, life insurance provides unique advantages, including immediate cash availability to purchase a deceased owner’s interest.
How a buy-sell funded with life insurance works
|
|
- A buy-sell agreement helps establish the value of the business and identifies the purchaser of the business interest.
- The buy-sell agreement helps the owners maintain continuity for their customers, employees and creditors
- The owners have the assurance that a deceased or disabled owner’s share of the business will not transfer to an unsuitable owner.
- When the buy-sell agreement is funded by life insurance, cash is available to purchase an owner’s interest, alleviating the strain of having to wait to get paid.
- A buy-sell agreement establishes a ready market for the business interest.
- A buy-sell agreement allows for the orderly transfer of ownership.
- Proceeds received from the buy-out may provide estate liquidity to offset debt, expenses and taxes. It may also provide a valuable income stream for loved ones.
**References: Lincoln Financial Group is one of many of our top rated carriers. We utilize Lincoln Financial Group for family and business insurance. This article was written by Lincoln and can be found here: https://www.lfg.com/public/general/buysellagreement
ECF Staff Writers January 27, 2020
