What Are Buy Sell Agreements?

Buy Sell agreements are a way to guard against the challenges that may ensue involving a company without a business succession plan.  In this scenario, the death of a business owner can cause problems for his or her heirs, and be a threat to the survival of the business itself.

A buy sell agreement allows the business, the surviving owners or the heirs of the deceased to purchase the late partner’s shares – at a previously established price – that requires the late owner’s estate to honor.

Life Insurance can help fund these agreements as an effective check against the upheaval that often occurs when a business owner or partner dies or suffers a permanent disability that prevents that person from returning to work.

And, since the majority of small businesses do not even have a basic succession plan, these agreement funded by life insurance can provide liquid cash and fill the void that otherwise immediately appears following the passing of an owner, partner or vested executive.

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The Advantages

The advantages of a buy-sell life insurance agreement are many, starting with the psychological comfort – the peace of mind business owners want, and deserve to receive – that ensures a company (and its employees) have the necessary protections, to stabilize the operations and overall costs of keeping a business running.

A buy-sell life insurance agreement may also provide a business with money, priced at a fair market exchange rate, to maintain cash flow and preserve the fiscal health of a company. This buy-sell life insurance advantage is significant because, without this type of life insurance coverage, a company may be unable to meet the daily costs of doing business, managing expenses, reimbursing third-party vendors or distributors, and funding everything from health care to paying taxes.

In addition to the tax advantages of a buy-sell life insurance agreement, this policy is a way to further a fair and timely transfer of assets, wealth, ownership of a business and various leadership responsibilities. For the heirs of a buy-sell life insurance agreement, this coverage guarantees that there is a buyer for the assets an heir (or a group of heirs) may be unable to handle.

Lastly, a buy-sell life insurance agreement gives a set of designated heirs the money to pay debts associated with an estate, or other unexpected costs, fees and taxes.

Fund Your Buy-Sell Agreement with Life Insurance.

Local Life Agents works with over 40 carriers to ensure you get the most death benefit for your dollar.

Benefits for Owners and Employees

Another benefit of having a buy-sell life insurance agreement is that it ensures the shares of a deceased owner, partner or executive do not go to someone who is not qualified to run or oversee critical assignments.

For workers, a buy-sell life insurance agreement enables these men and women to buy a stake in the business that is also their employer. In this situation, employees are shareholders – they have a major incentive to succeed – and this outcome is a means of maintaining the loyalty of existing customers, and preserving the confidence of creditors and other groups involving a business.

Types of Agreements

Of the two principal types of buy-sell life insurance agreements, a cross-purchase plan and an entity purchase or stock redemption plan, the former gives a business owner the chance to buy life insurance on behalf of one or more partners. The surviving owners can then use the death benefit to buy the deceased partner’s shares in their mutual business.

The latter is one where each owner or partner is part of an agreement, with the business in question, for the sale of his or her individual shares to the business.

Learn more about different types of business life insurance options here.

The Local Life Agents Advantage

You’ll be working with an Independent Life Insurance Expert.

Establishing a buy-sell life insurance agreement requires the insight and counsel of a skilled and experienced independent life insurance agent, someone with a proven record of success regarding this type of coverage.  Everything for the agreement to the funding of the agreement with life insurance has to be structured correctly.

Local Life Agents is your advocate – we are your source for any and all questions you may have concerning the purchase of a buy-sell life insurance agreement – so your business can operate without interruption or financial uncertainty.

Our reputation for excellence within this field is the result of our personalized service and extensive knowledge involving the purpose, advantages and types of buy-sell life insurance agreements a business can buy.

We are here to help you.  If you appreciate things being done right, feel free to reach out to our team and we can get the process started. Also check out our Key Man Life Insurance options here.

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