Business Life Insurance (Buy-Sell)

A buy-sell agreement is a contract between two or more business owners that outlines the terms of ownership transfer in the event that an owner retires, becomes disabled, or dies. Corporate buy-sell agreements are typically structured in one of three ways: a stock redemption, a cross-purchase, or a “wait and see” agreement.

• Entity Purchase Agreement: The business agrees to purchase the interest upon each owner’s death, disability or retirement.
• Cross Purchase Agreement: The owners agree among themselves to buy or sell their individual interest upon death, disability or retirement.
• “Wait and See” Agreement: Provides the flexibility to use either of the above methods at owners death.

A buy-sell agreement is a protection tool that can help secure the continuation of your business and the financial security of your heirs if you or a business partner dies, becomes disabled, or retires. In a cross-purchase buy-sell agreement, when an owner dies, the surviving business owners agree to purchase the business interest of that partner.

TO FUND THIS ARRANGEMENT WITH LIFE INSURANCE:

• Each business owner purchases a life insurance policy on each of the owners.
• Upon the death of an owner, the death benefit is paid directly to surviving owners.
• Owners then use funds to compensate deceased owner’s estate for their interest in the business.