Death or disability of a business owner means that the structure of ownership of your business will change. This may mean that the business needs to be sold or closed, or there may be a need for cash or assets to be used to buy out the disabled or deceased partners shares.
Have you thought about what you can expect out of the business should you have to leave it due to sickness or death? If you have a buy/sell agreement in place, how does the business pay for those shares?
There are a few options the business can take to settle the ownership of the remaining shares:
- Cash
- Selling assets
- Loans
HOWEVER, the most effective way is through
- Insurance.
The business would take out insurance on the shareholders, where by if a shareholder was to suffer a trauma, permanent disability or die, insurance would fund the buyout of the exiting shareholder’s shares and pay the estate the fair market value for those shares.
This ensures the company has the funds to buy those shares and reduces the risk of either having to sell assets or the business, or having to take out a loan and thus placing more debt on the business.
If you would like more information on how we can secure your business please contact us via email or call us directly.
Benefits of Business Owner Protection
- Exiting shareholder’s estate is paid rightful value for their shares
- Business will not have to come up with funds to buy the shares
- Remaining business owners will not need to worry about new partners
- Establishes the value of the business
