What am I talking about?

I’ve spoke to business owners and farm owners alike. Here’s one thing I’ve found that a lot of them have in common; Buy/Sell agreements.

When there is more than one owner to a business or farm, usually there is an agreement stating that one owner will buy the other owners family out if the other partner dies. It sounds great on the surface. The problem with most of these agreements is that there is no money in the partnership to actually do it.

Consider this; If a business doesn’t have enough cash to pay off the family, what good is the agreement? The surviving owner now has some tough choices.

1. Go into business with the deceased owner’s hiers.

2. Sell enough assets of the business or farm to pay the other family off. (in the case of farms, this could be the very equipment used to run the farm

3. Take out a loan to pay the other family off. ( The bank may not loan it or the owner may not be able to make the payments)

4. Talk the other family into taking payments.

You can see why some very good, long standing businesses simply disappear.

Another very good option would be for the partners to have life insurance on one another. This would be a simple way for the surviving partner to keep the business in tact and pay off the family of the deceased.

This also works great for the children of a business owner. Some children help run the business and some have other careers. When the parents die, there are a number of opinions about what to do with the business. The children who have been running it usually want it to continue. The children who have other careers aren’t usually as concerned about the survival of the business as they are about “getting their share” of this asset. Life insurance purchased on the business owners, while they are still healthy, can keep the business, or farm, running and satisfy the rest of the family too.

This is one of my favorite parts of my business. It helps so many people.

If you or someone you know could use a plan like this, please give me a call at(231) 744-9099 or start by checking out www.muskegonlifeinsurance.com

Tags: Assets, Business Owner, Business Owners, Buy Sell Agreements, Farm Owners, Insurance, Life Insurance, Money, Parents, Partnership, Survival, Tact, Tough Choices

This entry was posted on Monday, November 2nd, 2009 at 11:00 pm and is filed under Insurance Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.