This blog is by our guest, Deanne Stegeman with Country Financial. Previously our business blog has addressed business owners delegating tasks and leading without micro-managing, but what happens to your business when you are incapacitated or deceased? It is important to prepare our businesses, as well as our families, for the best of times and the worst of times. Deanne explains why...
You might think that when you die, your family could maintain their income by running the business themselves or by hiring someone to handle the day-to-day management. The fact is, your loved ones may not have the skills or the desire for the job and your co-owners may not welcome the idea of an unintended partner. A buy-sell agreement is an agreement between owners to buy out a co-owner’s share of the business in the event of that co-owner’s retirement, disability or death.
Buy-sell agreements are typically funded with life insurance policies, allowing remaining business owners to buy the company interests of a co-owner’s share, if he or she were to die, at a previously agreed-upon price. The amount is usually specified in a contract, which is created with the help of an attorney. This ensures that your business partners won’t have to scramble to come up with the money to buy out your share of the business and that your surviving family members will be fairly and promptly compensated for their share.
Need help figuring out what your business financial options would be if you decided to retire, sell your business or needed to change the management structure? Contact Quality Accounting Solutions to help you with your planning needs.