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Do you have a business partner? If you do, then you have probably thought about what would happen if your partner were to die suddenly. Who would inherit their share of the business?

If they are married, it would most likely be their spouse and you would have a new business partner. When I’ve brought this up to business owners, their immediate response is one of surprise. I hear things like, “she’s a nice person, but there’s no way in bleep we’re running this business together, I would buy her out.”

I’ll say, “Do you have the legal right to buy her out?”

“I don’t know,” comes the response.

“What if she doesn’t want to sell?” I ask.

“We can’t be partners,” is the stern reply.

“You told me your business is worth about a million dollars, do you have at least $500,000 in cash available to own the business free and clear.”

“I think I haven’t thought this through,” is the concerned conclusion.

buy sell agreement

 The answer is a buy sell agreement. You and your partner(s) need to decide on a value for your business. If one partner dies, the heirs of that partner are required to sell their share for a pre-determined price.

The next question is how do you fund the buy sell agreement? The obvious answer is with a life insurance policy. The life insurance will provide instant liquidity of income tax free cash that can be used to buy out your partners spouse or kids. If all partners are insurable, we will write a policy on the lives of each, with the policy owned by the business. The beneficiaries will be determined by the buy sell agreement.

The buy sell agreement contract should be drawn up by a qualified attorney. Browse for quotes on, then give us a call and we’ll help you find the most competitive policy you can qualify for.

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