Term Life Insurance Articles
The Role Of Term Life Insurance In Small Business Partnerships
2010-05-07
Some vexing complexity or intractable difficulty at your last job had always irked you. In fact, it gnawed at you. You complained about it daily. There should have been some solution. Then, one day, while having lunch with a fellow employee, the two of you struck upon an idea that solved the problem. The two of you nurtured that germ of an idea. Then the two of you went out on your own and formed a company to execute that idea. You both poured your hearts and souls and passion, as well as most of your assets into realizing that dream. And the dream is about to bear fruit.
What could go wrong? As long as the two of you maintain control of the business and focus on its operation, nothing should go wrong. And that's your plan. But what happens if one of you dies?
The answer to that question is very simple. Either you will predetermine what becomes of your business because you have had the foresight to establish a buy-sell agreement. Or someone else will make that determination when they dissolve your business to settle your deceased partner's estate.
Obviously, the first solution is preferable and is, in actuality, very easy to accomplish. Each partner executes a buy-sell agreement with the other giving the opposing partner the right of first refusal to purchase their share of the company. That is, in the event of a partner's death, the remaining partner has the right to purchase, for a fair valuation, the other partner's share before any other offers can be considered. The details of the valuation are also included in the buy-sell agreement.
And the money to purchase that share? After all, you've been building a business. Most of your profits have been reinvested. There's no money to fund an acquisition. Another question, also easily answered.
Term life insurance benefits easily and affordably solve this problem. Each partner simply takes out a life insurance policy on the other. In the event of one's death, the benefit is used to pay for the deceased partner's share of the business. The term life insurance benefits are manifold. Most notably, the business remains whole, in the hands of the surviving partner, with the obtainment of small business life insurance. Plus, not incidentally, proper provision is made for the family of the deceased. Keep that in mind. The structure of this deal also makes incredibly good sense for your family.
Don't leave the fate of your business in the hands of disinterested parties. The proper use of small business life insurance is a smart, affordable way to prepare for this and many other eventualities in the life of your business.
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Some vexing complexity or intractable difficulty at your last job had always irked you. In fact, it gnawed at you. You complained about it daily. There should have been some solution. Then, one day, while having lunch with a fellow employee, the two of you struck upon an idea that solved the problem. The two of you nurtured that germ of an idea. Then the two of you went out on your own and formed a company to execute that idea. You both poured your hearts and souls and passion, as well as most of your assets into realizing that dream. And the dream is about to bear fruit.
What could go wrong? As long as the two of you maintain control of the business and focus on its operation, nothing should go wrong. And that's your plan. But what happens if one of you dies?
The answer to that question is very simple. Either you will predetermine what becomes of your business because you have had the foresight to establish a buy-sell agreement. Or someone else will make that determination when they dissolve your business to settle your deceased partner's estate.
Obviously, the first solution is preferable and is, in actuality, very easy to accomplish. Each partner executes a buy-sell agreement with the other giving the opposing partner the right of first refusal to purchase their share of the company. That is, in the event of a partner's death, the remaining partner has the right to purchase, for a fair valuation, the other partner's share before any other offers can be considered. The details of the valuation are also included in the buy-sell agreement.
And the money to purchase that share? After all, you've been building a business. Most of your profits have been reinvested. There's no money to fund an acquisition. Another question, also easily answered.
Term life insurance benefits easily and affordably solve this problem. Each partner simply takes out a life insurance policy on the other. In the event of one's death, the benefit is used to pay for the deceased partner's share of the business. The term life insurance benefits are manifold. Most notably, the business remains whole, in the hands of the surviving partner, with the obtainment of small business life insurance. Plus, not incidentally, proper provision is made for the family of the deceased. Keep that in mind. The structure of this deal also makes incredibly good sense for your family.
Don't leave the fate of your business in the hands of disinterested parties. The proper use of small business life insurance is a smart, affordable way to prepare for this and many other eventualities in the life of your business.
