Buy Sell Agreement

When an owner of a closely held business dies, one or two things will happen:

The business interest will be retained by the heirs
The business interest will be sold by the heirs

Questions to ponder.

If you died yesterday, who becomes the new owner of your corporate interest?
If you die tomorrow, who should become the owner of your corporate interest?
Is it stipulated in your will?
Do you have a buy sell agreement with your partner or other shareholders?

A Cross purchase agreement How it works Today

Stockholders agree in writing that upon the death of either stockholder the survivor will purchase his or her entire stock interest.
Each stockholder purchases life insurance on the life of the other stockholder to fund the purchase and names himself or herself beneficiary.

At Death

Upon the death of either stockholder the surviving stockholder receives the tax free proceeds of the policy.
The surviving stockholder uses the fund to purchase the stock interest of the deceased stockholder. When this is done, the surviving stockholder continues the business.
There are many factors that need to be considered when executing a buy sell agreement. You should be guided by the advice of your attorney C.P.A. and Insurance professional.

Whether your business is a sole proprietorship, a partnership, or a corporation, the potential benefits of a good Insurance program will make it well worth your time studying.

Please read this disclaimer: This Internet site provides information of a general nature for educational purposes only and is not intended to be legal and or financial advice. We make no guarantees as to the validity of the information presented. Your particular facts and circumstances, and changes in the law, must be considered when applying insurance law. You should always consult with a competent financial planner, attorney, or insurance professional licensed in your state with respect to your particular situation.

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