Growing companies often purchase additional insurance coverages to better mitigate risks exposure, including that of its board and directors. Yet an often-overlooked component can leave companies vulnerable to financial ruin: the buy-sell agreement.
Key takeaways:
Employees Depend on the Resiliency of Small Businesses | Less than half of SMEs have succession plans in place, making difficult ownership transitions even more so. In the U.S. there are 6 million privately held firms with multiple employees — that’s a lot of Americans depending on these companies for their livelihoods.
Companies with Multiple Owners Are at Particular Risk | If one owner leaves the business unexpectedly, many companies do not have cash on-hand to maintain operational control from heirs or beneficiaries. A buy-sell agreement specifies how, when and at what price each owner will sell their business interest.
Funding with Insurance Reduces Risk| Funding a buy-sell arrangement can utilize financial tools like company savings accounts, loans, and life insurance. Life insurance carries less risk than other funding structures, allowing for immediate access to funds and at lower costs.
Case Study | Ensuring Operational Control Via Buy-Sell Agreement
