What if a co-owner was no longer with your company?
As the co-owner of a privately held corporation, you must consider the consequences of an owner suffering a disability or critical illness, passing away prematurely or retiring from the business.
A buy-sell agreement establishes the conditions by which an owner can purchase the share ownership of another owner. The agreement can apply to a number of situations, including an owner’s disability, critical illness, retirement or death.
Once the agreement is in place, it must be supported with proper funding to fulfill the intentions of the agreements. In the event of an owner’s death, for example, the surviving owner or owners need funds to buy out the deceased owner’s interest, and likely for working capital to replace that person’s contribution to the business.
Life insurance is a cost effective way to fund the agreement and provide tax-free dollars to buy out the business from the heirs.
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