Business partnerships are a lot like marriages. In both cases, you and your partner or spouse share certain goals and work together to achieve them. And, in both cases, financial issues can cause considerable stress.
One way you can proactively relieve some of the potential stress associated with co-ownership of a small business is with a buy-sell agreement.
What is a buy-sell agreement?
A buy-sell agreement is a binding contract between business owners that establishes who can buy a departing owner's share of the business and at what price and upon what terms. Typically, the other co-owners or the business itself will purchase the departing owner's business interest. The buy-sell agreement also establishes how the purchase will be funded.
With a buy-sell
A buy-sell agreement potentially solves several problems:
• The remaining owners won't have to deal with new, unwanted co-owners.
• It helps ensure a smooth transition of ownership, helping the business retain customers.
• It can guarantee that the deceased owner's heirs receive a fair price based on an agreed upon valuation method.
Without a buy-sell
Without a buy-sell agreement, some difficult situations could arise. For example, an inexperienced adult child might inherit a deceased partner's ownership share, which may be detrimental to the business in a variety of ways. A surviving spouse could sell the deceased partner's share of the business for less than its fair market value. And, without a buy-sell agreement, a deceased partner's heirs might have to sell the business to pay debts, final expenses and/or estate taxes.
Funding a buy-sell agreement
One effective way of funding a buy-sell agreement is to use life insurance to provide the cash that will be needed to purchase a deceased owner's interest. Life insurance premium costs are generally far less than the amount of cash it would take to fully finance the purchase of a deceased partner's share of the business. Consult your financial professional to evaluate your need for a buy-sell agreement.
FINRA Reference #FR2012-0821-0297/E 12/05/12
One way you can proactively relieve some of the potential stress associated with co-ownership of a small business is with a buy-sell agreement.
What is a buy-sell agreement?
A buy-sell agreement is a binding contract between business owners that establishes who can buy a departing owner's share of the business and at what price and upon what terms. Typically, the other co-owners or the business itself will purchase the departing owner's business interest. The buy-sell agreement also establishes how the purchase will be funded.
With a buy-sell
A buy-sell agreement potentially solves several problems:
• The remaining owners won't have to deal with new, unwanted co-owners.
• It helps ensure a smooth transition of ownership, helping the business retain customers.
• It can guarantee that the deceased owner's heirs receive a fair price based on an agreed upon valuation method.
Without a buy-sell
Without a buy-sell agreement, some difficult situations could arise. For example, an inexperienced adult child might inherit a deceased partner's ownership share, which may be detrimental to the business in a variety of ways. A surviving spouse could sell the deceased partner's share of the business for less than its fair market value. And, without a buy-sell agreement, a deceased partner's heirs might have to sell the business to pay debts, final expenses and/or estate taxes.
Funding a buy-sell agreement
One effective way of funding a buy-sell agreement is to use life insurance to provide the cash that will be needed to purchase a deceased owner's interest. Life insurance premium costs are generally far less than the amount of cash it would take to fully finance the purchase of a deceased partner's share of the business. Consult your financial professional to evaluate your need for a buy-sell agreement.
FINRA Reference #FR2012-0821-0297/E 12/05/12
Northbeam Financial, Inc. and LTM Publishing, Inc. are unrelated.
This is an advertisement prepared by LTM Publishing, Inc. for the use of the sender. Articles are not written or produced by the named representative. The advertisement provided is not intended as legal or tax advice and may not be relied on for purposes of avoiding federal tax penalties. All individuals, including those involved in the estate planning process, are advised to meet with their tax and legal professionals. The individual sponsoring this newsletter will work with your tax and legal advisors to help select appropriate product solutions. We do not endorse or guarantee the content or services of any website mentioned in this newsletter. We encourage you to review the privacy policy of each website you visit. Limitations, restrictions and other rules and regulations apply to many of the financial and insurance products and concepts presented in this newsletter, and they may differ according to individual situations. The publisher does not assume liability for financial decisions based on the newsletter's contents. Great care has been taken to ensure the accuracy of the newsletter copy at press time; however, markets and tax information can change suddenly. Whole or partial reproduction of Let's Talk Money® without the written permission of the publisher is forbidden. ©LTM Publishing, Inc., 2012.
We Value Your Input... Your feedback is very important to us. If you have any questions about any of the subjects covered here, or suggestions for future issues, please don't hesitate to call. It's always a pleasure to hear from you.
This is an advertisement prepared by LTM Publishing, Inc. for the use of the sender. Articles are not written or produced by the named representative. The advertisement provided is not intended as legal or tax advice and may not be relied on for purposes of avoiding federal tax penalties. All individuals, including those involved in the estate planning process, are advised to meet with their tax and legal professionals. The individual sponsoring this newsletter will work with your tax and legal advisors to help select appropriate product solutions. We do not endorse or guarantee the content or services of any website mentioned in this newsletter. We encourage you to review the privacy policy of each website you visit. Limitations, restrictions and other rules and regulations apply to many of the financial and insurance products and concepts presented in this newsletter, and they may differ according to individual situations. The publisher does not assume liability for financial decisions based on the newsletter's contents. Great care has been taken to ensure the accuracy of the newsletter copy at press time; however, markets and tax information can change suddenly. Whole or partial reproduction of Let's Talk Money® without the written permission of the publisher is forbidden. ©LTM Publishing, Inc., 2012.
We Value Your Input... Your feedback is very important to us. If you have any questions about any of the subjects covered here, or suggestions for future issues, please don't hesitate to call. It's always a pleasure to hear from you.
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