Business Buy-Sell Funding

1. What is this?
2. Why do I need it?

If you are in business, you are either a sole proprietor, a partnership, or some form of a corporation such as an S, C, or possibly an LLC or an LLP.

Most businesses have what is called a Buy-Sell Agreement between the partners or the owners to protect their heirs IF a life-event, such as the Death of a partner, or the Divorce of a partner impacts the day-to-day operation of this business *.

It is a fact that over 80% of Buy-Sell Agreements are NOT FUNDED.

This means that if there is a life-event such as the above (*) and the Buy-Sell Agreement comes into play, the company must perform and pay the agreed upon payment to the named parties in the agreement.

But where do they get the funds?

What if the agreement was made years ago and does not take into consideration the true value of the business as it is today?

What if the agreement, made years ago, contracts to pay $3,000,000 for the shares of a partner/owner but the true value is $8,000,000 ? What if the true value has gone down to $1,000,000 ?

There are several issues here and primary among them is:

Where does the business get the money to pay?

If the agreement IS NOT FUNDED, the money MUST be taken out of the business either in cash or the business must take get a loan to pay. There is no choice.

If the business is not able to pay or to get a loan, this usually means the business must be sold or closed and liquidated to pay this obligation.

If the business has FUNDED their Buy-Sell Agreement, the monies due are paid with no impact on the business.

How do you fund a Buy-Sell Agreement?

This is both simple and inexpensive.

You FUND a Buy-Sell Agreement with Life Insurance. Thats it!

You can use inexpensive TERM INSURANCE or if you want to build some sort of nest egg for your business, you could use a form of PERMANENT INSURANCE.

In any case, your Financial Services Insurance Agent will be able to guide you to what is best for you.

I am available to speak to groups to help enlighten them on this important subject.

My contact numbers are as above.