As a business owner, you realize the importance of your business and the protection that binds it when a covered loss happens; however, have you considered what may happen to your business should something happen to you or your business partner? Nobody likes to consider an untimely death of you or your joint business partner or perhaps a sudden decision to leave the business, but the unexpected can happen quickly and could leave you in financial disarray if you aren’t prepared. Have you considered a Buy-Sell Agreement to protect your Oklahoma business once you are gone? If you haven’t, then you should and here is why.
A Buy-Sell Agreement and How it Works
Life would be a lot easier if everything was mapped out and precisely executed; however, life brings many unexpected situations, some of which can be devastating. Planning won’t prevent those unexpected circumstances from happening, but having a protection plan in place for when they do, can reduce the likelihood of some serious financial consequences. A Buy-Sell Agreement is a legal contract that is established between business owners to signify how the business will continue should one of you die unexpectedly or choose to leave the business abruptly. When this type of situation happens, the contract is very precise on who will “buy” the deceased person’s part of the business and who will “sell” at an established price; hence the name Buy-Sell Agreement.
Preparation on the Front End May Prevent Disaster on the Back End
Consider this situation. Imagine that you saved for ten years to invest in your dream plumbing business and along the way, you found someone who shared that same dream. Between the two of you, you build and establish this business with a lot of time, hard work, money, and dedication; but then your business partner (who owns 49% of the business) dies suddenly and without this type of Buy-Sell Agreement in place, his share of the business is up for grabs by one of his children, who has zero interest in the plumbing industry. The success of your business could be greatly compromised without this contract in place.
Some Considerations of a Buy-Sell Agreement That Can Protect Your Business
- The Buy-Sell Agreement takes the guesswork out of the price of the share of the business since it is clearly outlined in the contract.
- The Buy-Sell Agreement is characteristically financed by life insurance so the money is available to purchase the deceased owner’s interest in the business.
- The Buy-Sell Agreement indicates who can purchase the partner’s portion of the business if a death or something else occurs to you or your business partner.
- Some usual reasons that a buy-sell agreement may be needed would include death, abrupt decision to leave the business, or disability, to name a few.
- The contract protects the business from the financial consequences that may result when situations happen unexpectedly to you or your business partner(s).
RCI Insurance Group is here for all of your business insurance needs and can assist you with any questions regarding a Buy-Sell Agreement, funded by life insurance, and how it may relate to your Oklahoma business situation. Call us TODAY at 918-341-6081.