What Is A Buy-Sell Agreement Life Insurance

October 14, 2021

When developing a shareholders` agreement with life and disability insurance provisions, all parties should have their own independent legal counsel and the contract itself should be drafted by an experienced lawyer with knowledge and expertise in this area. Life insurance can play an important role in all of these plans by providing guaranteed funds for purchase as long as the required premiums are paid. When starting or growing a business with a partner, writing a buy-sell agreement isn`t as much fun as your next big selling pitch, but it should be a key priority. It`s an agreement that protects you and the company if something were to happen to you or your partner. When owners acquire the shares of a deceased owner, they receive a base equal to the purchase price of that interest, which can reduce capital gains tax in the future when the corporation is sold. Since the company does not make the purchase, the restrictions imposed on the company due to loans would not prevent the remaining owners from using the insurance proceeds to purchase the deceased owner`s interest. Cross-purchase agreements also have problems that need to be taken into account: a purchase contract defines when and to whom you can sell your part of the business and sets a fair price. How you structure your purchase agreement determines who buys the outgoing owner`s shares in the company, how much the buyer will pay, and how the purchase agreement should be set up. .

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