There is considerable planning that goes into running a Denver business. This is especially true if there is more than one partner involved in the business. It is important to have a clear understanding and agreement if something should happen to one of the owners. Buy/sell agreements among co-owners, or present and future owners, of a closely held business are intended to ensure the smooth future transition of its ownership. They provide the mechanism, and, if properly funded, the means to effect a change in control and transfer of interests.
Buy/sell disability insurance can fund the exchange of company ownership. There is also a buy/sell plus product that combines buy/sell and key personal disability combined into one policy.
Here are some of the benefits of a buy-sell agreement:
- Provides recovery for partners and heirs
- Tax advantages
- Provides for transfer of ownership and wealth
- Creates fair and market value exchange of ownership
- Death, disability, retirement, divorce, loss of license, termination, and voluntary transfer of ownership.
Any buy/sell agreement requires a decision regarding the type of insurance policy to purchase. The initial choice is between term and whole life insurance. The ability to maintain life insurance throughout a shareholder’s life is important. Of course there are other methods of funding including cash, borrowing, and stock. But the most common form of funding is insurance.