The lack of a second business owner does not eliminate the need for effective buy-sell planning. A well thought out, formal agreement with proper funding can still accomplish the owner’s goals for the business upon retirement, disability, or death.
A place where this can break down is the buy-sell agreement itself. There are countless stories of businesses without a plan in place, and one of the frequent causes is the lack of a clear successor. That, like so many other issues, can be overcome with the right kind of planning. The most effective approach addresses both the planned and unplanned triggering events and can employ the leverage of life insurance to create or augment a funding strategy.
Typically, the business itself is the primary asset of the business owner. Typically, there is no clear successor. If a sale to an outside buyer is planned, all should be smooth. However, an “unplanned” exit remains a significant challenge.
The answer can be found in what is referred to as a “No Sell” Buy-Sell. A trust is established which gives the business owner (and his family) control of both sides of the transaction. This trust becomes the buyer of the business, funded by life insurance proceeds. The establishment fundamentals are still there: Establishing a fair market value of the business and of course funding the plan with a life insurance policy.
What does this do? It gives the surviving family members time. They control the business via the terms of trust. When the business is ultimately sold to an outside party, it will be at a time and at terms of their choosing. Even if the business is sold for less than hoped, the insurance proceeds are still there to make the family whole. Hard to beat that!
This is not to be considered legal advice, and of course counsel should be sought to draw up such an agreement. However, our agency can certainly provide avenues for life insurance funding.
Please contact us for more information and a customized proposal.
Our Life Insurance Expert
James is a 40-year veteran of the life insurance marketplace in the Greater Chicago area. His career has included a 22-year association as a branch manager and senior account executive with Hartford Life, earning top national office and top national account executive designations, while qualifying for award-conference level in 20 of those 22 years.
Our value proposition is a simple one. Offer a thorough and cost-effective solution to business clients through careful analysis, consultation, and implementation.
Contact James at info@GoCGO.com.
This is not to be considered tax or legal advice. Please consult with the appropriate professional resources.