Business Continuity Planning - Funding Buy-Sell and Key Person Funding
For most closely held businesses, the unexpected death of an owner can be the worst-case scenario. The delicate balance between the business owners, their spouses and families and the employees and their dependents can be capsized in an instant. Other buy-out triggering events include the disability, retirement or bankruptcy of a partner. Benefits of the Buy-Sell
Creates market for an illiquid asset, converting it to cash
Avoids forced sale to raise cash.
Controls ownership–so that surviving owners avoid being in business with a deceased owner’s spouse or other family members.
Design and Funding Considerations include:
Value of Business, Agreement Terms, payout-lump sum, installments and triggering events.
Structuring buy-sell agreement: cross purchase, entity redemption or wait-and-see.
The business’s current value and how it will be determined in the buy-sell agreement.
With all of the different variables and contingencies, you need a real expert to help you figure out the best plan for you, your company. Many insurance agents approach business owners pushing the need for a buy-sell - they're just looking to sell a couple of insurance policies. You need a business contingency expert to help you take a comprehensive analysis of all possible situations. If you've not done this planning - or not reviewed it in awhile - I'd love to have a conversation. I'm sure I can help you identify some issues or give you a few ideas whether we ever work together or not.