Close

Share:

Reduce Your Risk.... Learn How a Buy-Sell Agreement Can Help Protect Your Business.

Date: April 01, 2014

Is your business at risk? You've been in business with your partner for 12 years. If something happened to your partner tonight would you be forced to become partners with the heirs? Or, maybe you’re a sole proprietor planning for your heirs to sell your company to a key-employee at your death but they can’t agree on the sale terms, appropriate pricing, and/or don’t have the available funds when needed? If you do not have a properly drafted and funded “Buy-Sell Agreement” in place, you are taking that risk…every day!

Small business owners should plan effectively to determine what happens to their business in the event of permanent disability or death of the owner. Proper planning can lead to an orderly transfer of business interests in a way that satisfies the goals of all parties.

What is a Buy-Sell Agreement? 

Simply stated, a properly drafted and funded Buy/Sell Agreement accomplishes the following goals:

  • Establishes the events that trigger a buyout, such as death of an owner
  • Removes uncertainty by protecting the interests of all parties
  • Identifies the future buyers
  • Predetermines the sales price of the business through an agreed upon valuation method
  • Provides the ready cash to ensure the business is sold at a fair price

How do I set up a Buy-Sell Agreement? 

Your attorney, CPA, and life insurance professional can be extremely helpful in this area.  While there are document templates that cover the broad issues, the specific terms of your agreement must to be tailored to meet the objectives of you and the intended buyers.  A short conversation with your attorney can help you determine how complex your agreement needs to be. 

How do I fund the agreement? 

The best contractual agreement, by itself, may not be worth the paper it’s written on without the cash required to implement the plan!  In the case of a business owner’s premature death, life insurance is generally the best way to provide timely access to tax-free proceeds exactly when needed.


blog comments powered by Disqus

Subscribe For Free News And Tips

Enter your email to get FREE small business insights. Learn more

Special Offer

American General Life and Accident Insurance Company (AGLA), an NFIB preferred provider, works with small business owners every day to help provide the funds necessary to fulfill these types of agreements.

Learn more about AGLA’s life insurance solutions.

NFIB.com Poll: Sponsored by Insightly

Do you use a CRM to manage customer information?





POLL RESULTS

Do you use a CRM to manage customer information?

Yes, I use a CRM. - ( 206 votes )

CRM? I use Excel. - ( 105 votes )

Excel? I use paper and pencil! - ( 35 votes )

No, I don't use any CRM system. - ( 123 votes )