Owners of small businesses are typically focused on day to day operations of their company. As a result, many businesses do not prepare for continuing the business after an owner’s death. To prevent this unfortunate occurance, business owners may enter into agreements with each other—known as buy sell agreements—to assist in the sale of their business interests in case of disability, or death.

The most common type of buy sell agreement is known as a Cross-Purchase Buy Sell Agreement. In this type of structure, the owners agree to buy and sell their business interests to one another at a set price upon disability or death.

Rather than rely on borrowing money to fund the purchase, each owner buys a life insurance policy on the other business owner. The life insurance proceeds are then used to fund their obligations to each other.

This type of buy-sell agrement may be funded with permanent life insurance and the policy cash values may be used to supplement a buy-out at retirement if an owner wants to sell their interests before death.

Contact us to discuss your business interests.