Why Do You Need A Business Continuation Plan?

Ask yourself "If you were to die before your business partner(s), what do you want your family to get out of this business for your years of hard work? If one of your business partner(s) died before you, do you think you would find his/her heirs helpful or a hindrance in managing the company?"

How Do You Propose To Buy Out Your Business Associate? One Answer Is An Insured Buy/Sell Agreement!

Business Continuation Planning Using Insured Buy-Sell Agreements

There Are Two Basics Types Of Insured Buy/Sell Agreements:

Cross-Purchase Agreement - Whereby the surviving owners are obligated to buy and the estate is obligated to sell a deceased partner@s business interest.

• Owners "A" and "B" enter into a buy/sell agreement.
• Each owner is the applicant, owner, premium payor and beneficiary of a life and/or disability insurance policy covering each other@s life.
• At death of owner "A" surviving owner "B" receives tax-free proceeds from the insurance company.
• Owner "B" uses the proceeds as cash to purchase owner "A"s@ business interest from his or her estate.

Stock Redemption or Entity Purchase Agreement @ Whereby the business is obligated to buy and the estate is obligated to sell a deceased partner@s business interest

• Owners "A" and "B" enter into a buy/sell agreement.
• The business is the applicant, owner, premium payor and beneficiary of a life and/or disability insurance policy covering each other@s life.
• At death of owner "A" the business receives tax-free proceeds form the insurance company.
• The business uses the proceeds as cash to purchase owner "A"s@ business interest from his or her estate.

Benefits Of An Insured Buy-Sell Agreement To The Heirs:

• Provides A Market @ Often this is the only market for the disabled or deceased@s business interest, at a fair price. The benefit is received in cash, without delay and at a price previously fixed by an insured buy-sell agreement.
• Eliminates Emotional Conflicts @ The danger of friction and bickering between the heirs and the surviving stockholders has been reduced or eliminated.
• Creates Cash @ The deceased@s interest, instead of remaining in a speculative business, is converted into cash, which may, when the estate has been closed, be invested by the heirs in non-speculative assets, thus providing a stable income for the family. The family of the deceased is not dependent upon the surviving owners for adequate income.
• Expedites Settlement Of The Estate @ The business interest, which is usually the major asset of the estate, is immediately converted into cash. The executor has the liquidity necessary to pay final expenses, debts, taxes, and other probate costs, promptly and economically.

Benefits Of A Insured Buy-Sell Agreement To The Surviving Owners:

• Stabilizes The Business @ In the event of the death or disability of an owner the survivors will own the company and control of the business is assured.
• Creates Peace Of Mind @ Owners have a positive attitude knowing that if an owner dies or becomes disabled, heirs will receive the full value of the business interest in cash, and the surviving owners will be the sole owners of the business.
• Strengthens Credit @ Insured buy-sell agreements creates an automatic payment of cash to buy the business interest of a deceased or disabled owner thus insuring preservation and continuance of the business.