Sell Agreement Insurance
A buy-sell agreement is a legally binding document that stipulates what
will happen to a business when a business owner or partner becomes disabled,
dies, retires or decides to sell his or her interest in the company. Buy-sell
planning is an extremely important part of long term business continuation
planning. The common types of buy-sell plans include the stock redemption
agreement or entity plan, the cross purchase buy-sell agreement and the wait-and-see
- Stock Redemption Plan
or Entity Plan: An agreement between the company (Entity) and the business
owners or partners whereby the owners agree to sell their ownership interest
back to the company if they become disabled or wish to retire. If there
is a death of an owner, the owner’s estate is required to sell the deceased owner’s
interest back to the company. For additional information, see What
is a Stock Redemption Plan?
- Cross-Purchase Agreement:
A written agreement among the company partners or stockholders to purchase
shares at the disability, retirement or death of a business owner. For
more details, see What
is a Cross-Purchase Buy-Sell Agreement?
- Wait-and-See Buy-Sell Agreement: An agreement allowing the business owners
to delay the selection of an entity plan or a cross-purchase buy-sell agreement
until an actual death, disability, retirement or sale of a business interest.
For specific details, What
is a Wait-and-See Buy Sell-Agreement?
Which Type of Buy-Sell Plan is Best for My Company?
The questions below will help you identify the type of buy-sell agreement
that may best fit your business.
- How many business owners does the company have?
- How old are the individuals
that own the business?
- Is each of the owners insurable?
- What are the ownership interests of each
- What is the value of the business?
- Is this a family owned company?
- What is the potential tax impact for each
- What are the estate planning implications for each option?
The answers to each of these questions will provide insight into which plan
will suit your business. Consulting with your business attorney and CPA or
tax advisor is the only way to assure you address all potential concerns
and choose the proper plan structure.
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