When you start your dream business, you typically don’t think of all the possibilities of what could happen to your business, but you should. Obviously insuring your business for unfortunate incidents is vital to the success of your business; but have you considered what may happen if you jointly own the business and something happens to you or your business partner? Using a Buy-Sell agreement to perpetuate your business after you are gone is something you may want to consider if you want your dream business to continue.
What is a Buy-Sell Agreement?
A Buy-Sell Agreement is a legally bound contract between the owners of a business that outlines how the business will continue when one of the partners dies or leaves the business. It simplifies the transfer of ownership, outlines who will “buy” the deceased person’s business interest, who is required to “sell” AND at what price. This type of agreement is sometimes referred to as a “business will” or “buyout” agreement and is often funded through life insurance.
Agree to Protect Your Business
Imagine that you and your lifetime friend decide to open a restaurant and you invest 40% while your friend invests 60%. As a result of hard work, dedication, loyal patrons, and a close-knit business relationship, your restaurant, together, is flourishing and financially successful; however, 10 years into the business, your business partner dies unexpectedly.
If you don’t have a Buy-Sell Agreement in place, you must consider the possibilities of what could happen to you and the restaurant. Without a Buy-Sell Agreement, a family member of your business partner may inherit the restaurant investment (60%) even though that particular person has no interest in being part owner and lacks skill and expertise in the restaurant industry.
Some Benefits of a Buy-Sell Agreement Include, but Not Limited to:
- The Buy-Sell Agreement is typically funded by life insurance so that money/assets are available to purchase the deceased owner’s interest in the business.
- The price of the “buy-sell” is clearly outlined in the agreement.
- The agreement protects the business from the financial impact that may occur when you or a business partner dies or leaves.
- The Buy-Sell Agreement specifies “who” can purchase the shareholder’s or partner’s portion of the business, if death or something else occurs to you or your business partner.
- Some typical reasons for a Buy-Sell Agreement include death, retirement, disability, or a decision of you or your business partner deciding to leave the business.
Paramount Insurance Agency is here to assist you with any questions you may have regarding a Buy-Sell Agreement, funded by life insurance, and how it may relate to your business. We are here for all of your North Carolina insurance needs so call us TODAY at 866-869-3335.