Buy-Sell Agreements
What is a buy/sell agreement?
It is a legal agreement between shareholders or business owners that provides for a smooth transfer of ownership when a co-owner dies, becomes disabled, or retires.

Questions that owners or shareholders must consider when entering into a buy/sell agreement:

• Who will inherit or buy the business interest?
• What price will be paid for the business interest?
• Where will the money come from to buy the co-owner's business interest?

Who will inherit or buy the business interest?

• A stranger
• A competitor
• Remaining shareholder(s)/business owner(s)
• Business interest could be left to spouse of deceased owner shareholder

Would he or she be active in the business?
Which of these makes sense to you?

What price will be paid for the business?

• A key benefit of a Buy/Sell agreement is that the owners or shareholders agree, in writing, upon a guaranteed price or formula, as well as a purchaser of the business interest today.
• The business interest is valued on a "going concern" basis.
• The price is subject to a periodic review.

Where will the money come from to buy the business interest?

• From the remaining shareholders' personal resources?

Where will the money come from?

• By borrowing from your bank?

With one of the key profit-makers no longer around, would your bank loan you the money?
Where will the money come from....?

Buy the business interests out of profits over time?

Could your business afford this drain on your profits every year?

Would this be an acceptable arrangement for all parties concerned?

Where will the money come from....?

• Insurance dollars that fund your buy/sell agreement:
  • Guaranteed!
  • Proceeds are tax-free!
  • Provides the money at the exact time it is required!

Benefits of an Insured Buy/Sell Agreement:

• Creates a guaranteed market for each owner's business at a fair price.
• Provides cash to the family of the deceased or disabled owner.
• An insured Buy/Sell agreement assures employees, creditors, suppliers and customers that the death, disability or retirement of a business owner will not disrupt any day-to-day operations of the business.
• Working capital in a business remains untouched.

Does an insured Buy/Sell Agreement make sense to you?
If a permanent solution such as a universal life plan is the best solution for your business then you can invest funds in these plans over and above the insurance premiums and the funds will grow completely tax sheltered within allowable limits. These funds can be used to help fund the retirement of the business owner or key person.

Please contact us regarding setting up a customized buy-sell (key-person for key person section) agreement that best suits your business's needs. If you do not have your own professional advisors, we will bring in our accounting, legal and insurance specialists to structure your plan. We also recognize that a business is an ever changing entity and we recommend an annual review of your agreements to ensure that you are properly ensuring the future succession of your business. Again, we do not charge for our services and our compensation in this area is paid by the insurance company.

Key Person
The most valuable asset of any business is its key people.

Most successful businesses have one or more people whose unique talents make a significant contribution to the bottom line.

Who are these key people?

• You
• People with specialized technical talents
  
• People who have unique relationships with valued customers
  
• People who attract new business
  
• People responsible for major projects

What would be the impact on your company's profits if one of your key people died or became disabled?
This impact can be felt in one or more ways:

Financial Risks:
Would there be a loss of sales and profit?
Would your line of credit be affected?
What would be the cost to recruit, hire and train a replacement?
Would a suitable replacement be available and would you have to pay a "premium" to secure this position?

Business Risks:
Would projects stop?
Would job momentum be lost?
Would this have an effect on job security for other employees?
Would customers be lost?
Would the business maintain its good reputation?
Would the business continue?

Is there any one of these that would apply if you lost one of your key people?
Where would the money come from to offset the financial and business risks caused by the loss of a key person?

Benefits of a Key Person Insurance Solution:
Guaranteed
Most economical way of providing cash.
Proceeds are tax-free.
Money is delivered at the exact time it is needed.
Future of business is secure.

Does an Insured Key Person Arrangement make sense to you?
If a permanent solution such as a universal life plan is the best solution for your business then you can invest funds in these plans over and above the insurance premiums and the funds will grow completely tax sheltered within allowable limits. These funds can be used to help fund the retirement of the business owner or key person.

Please contact us regarding setting up a customized key-person agreement that best suits your business's needs. If you do not have your own professional advisors, we will bring in our accounting, legal and/or insurance company specialists to structure your plan. We also recognize that a business is an ever changing entity and we recommend an annual review of your agreements to ensure that you are properly ensuring the future succession of your business. Again, we do not charge for our services and our compensation in this area is paid by the insurance company.