Do you and your co-owners have a strategy in place to transfer your business to the right people, at the right time, for the right amount of money? That’s what a buy-sell agreement allows you to do. Having a buy-sell agreement in place can help protect the future of your business.
A buy-sell agreement is an important aspect of your overall exit strategy. It helps create a market for the business when an owner dies, leaves the business, or becomes disabled. When structured correctly and funded with life insurance, and or disability insurance, a buy-sell agreement can help provide a solid start to your business exit plan and the people who depend on the future of your business.
Some of the key protection benefits of a buy-sell agreement includes:
Co-owner: Co-owners of the business get protection by providing them the opportunity and funding to purchase the business interest of a deceased, disabled, or a departing owner.
Business: Protect the business by preventing and/or limiting transfers to parties that might be unqualified or undesirable, by requiring certain restrictions.
Continuation: Minimize conflicts among owners by setting the price and terms of a sale when an owner leaves the business. Depending on the growth of your business, you may want to have the business valued every couple of years or so to be sure the buy-sell agreement has the appropriate funding in place.
Estate: Fix the value of your business interest for estate tax purposes if the price meets the IRS guidelines at the time the agreement was signed. Also, be sure to consult your accountant regarding all tax related questions. The estate tax limits can change.
Family: You and your family can be protected by having co-owners buy your interest in the business for a set price and providing them with the funding to do that if you die, become disabled, or leave the business.
Thank you for reading. For more information about how a buy-sell agreement funding option can work for you, please submit your information on our contact page, or call us today!