If you are a sole proprietor, then a Buy-Sell is not required, however, if you are incorporated, have holding companies, etc., then you should at the very least, consult with your trusted professionals. Without a buy-sell agreement, you could find yourself sharing the reins of your LLP or corp with your former partner’s spouse, children, or someone else. Would you want to be in business with someone who knows little about your business and does not have skin in the game?

A buy-sell agreement in basic terms, is an exit strategy for you and your business partners. It can protect you, your family, and partners, because it sets ground rules for how ownership shares should be dealt with or restructured, should you, or one of your partners leave the business.

If you ever need to act on your buy-sell agreement, the money will change hands. Do you have a cash account set aside for this purpose? Sources of revenue could include cash, Csv, installments, or collateral loans. Many shareholders and partners utilize life insurance as a cost- and tax-efficient solution. Cash values, also known as CSV, are available. If an entity-redemption agreement is in place, the Entity, LLP, or Corporation purchases individual life insurance contract on the lives of each owner. The entity then funds the monthly or annual premium and is both the owner, beneficiary of the agreement. When an owner of the policy passes away, the LLP, Corporation, an or Entity uses the income-tax-free sheltered death benefit to purchase the deceased owner’s shares. A cross-purchase buy-sell,allows each owner to buy a policy on the other owner(s). When one of the owners’ passes, the surviving owner(s) use the death benefit to purchase the deceased owner’s shares.

Yes, one of the greatest threats to your livelihood, is the ability to manage your risk beyond your control. All shareholders included in your LLP, or Corporation, run the risk of Death, Disability, Failure of Health, and eventually Long Term Care. Ask yourself this: If something were to happen that affected my ability to earn an income, how would I fare? What if this happened to my partner(s), how would it affect my LLP or Corp?

Peters Wealth Management does not charge a fee for building a holistic financial plan. Consultations provided at No Cost, No obligation to all. Full financial disclosures provided transparently, and at the time of any transaction executed at the request of the client.