Protecting Your Business Against Loss
As a business owner there are many concerns and issues that keep you up at night. Some of those concerns may feel very immediate to you and you know they need to be addressed today. For instance, what could have happened if you , a business partner or a key employee of your business had died or became disabled yesterday?
Entity Purchase Agreement (Sometimes called a Stock Redemption Agreement):
Under this agreement, the buyer is the business. The business owners agree to sell their ownership interest back to the business if they become disabled or wish to retire. If there is a death of an owner, the owner’s estate is required to sell the deceased owner’s interest back to the business.
Life insurance
For many business owners, insurance can be the most cost effective option. The life insurance death benefit can provide the needed cash to complete a purchase at death and the cost to purchase the insurance may only be pennies on a dollar.
For lifetime buyouts in the event of divorce, disability or retirement, the policy cash value can be accessed through loans and withdrawals to supplement funds needed to complete the purchase.
Note that the cost and availability of insurance can vary based on age, health and benefit amount. Policy loans and withdrawals reduce the policy's cash value and death benefit and may result in a taxable event.