Why wait? Protect your business today with a buy/sell solution!
If you are in business with one or more partners, it is essential that you consider what would happen if one of you were to die suddenly or become totally and permanently disabled. Buy/sell insurance, also known as partnership or equity insurance is the solution that will ensure their shares in the business are acquired and redistributed to the remaining business partners without the need to raise the funds needed to do so yourself.
A comprehensive buy/sell succession solution essentially has two components:
- The contract: You and your business partners need to come to an agreement as to the value of the business. Once you are in agreement a buy/sell contract will be drawn up by legal professionals. As the value of your business changes, we recommend that you and your partners revisit the buy/sell contract at least once per year and amend if necessary.
- The insurance: Once the business value has been agreed upon, we will then implement the buy/sell insurance, which operates similar to a normal life insurance but is designed specifically for business partnerships. Should one of the business partners be permanently disabled or die, this insurance will pay out the value agreed upon to his or her estate thereby allowing the remaining business partners to acquire his share in the business with minimal cost or business interruption.
With over 13 years of experience in key person and buy/sell insurances, Katriel Warlow-Shill and the team at Verdure Financial planning Solutions are the thought leaders for all your business succession needs. Our partner law firm KWS Legal will be more than happy to assist with the buy/sell contract as well as any other commercial law needs that you might have.
The consequences of not having a comprehensive buy/sell succession solution can be costly and could be detrimental to the survival of the business. If a business partner becomes totally incapacitated or dies, his spouse or estate may acquire his shares in the business and they may make executive decisions as such. Furthermore, the surviving business partners need to agree with the spouse or family on the value of the business that could involve litigation and then they need to come up with the necessary funds to buy out the spouse or estate.
Buy/ Sell Insurance helps with the smooth succession of the business from one owner to another and provides security for employees. Ownership protection can provide the surviving business partners, or their nominees, with sufficient cash for the transfer of the outgoing owner’s equity, if a business owner dies, is disabled or suffers a critical illness. A buy/ sell insurance policy can help with:
Providing funds to pay out the outgoing partner’s family or estate
Retaining income from the loss of business which may occur with the outgoing of a partner
Minimise confusion as there will be a clear understanding of the business ownership and structure
Avert lengthy and costly litigation of an agreement cannot be reached as to the value of the business
Transfer of shares will go into the hands of surviving business partners, which is essential for the wellbeing of the company