Risk & Business Magazine Cal LeGrow Fall 2016 | Page 6

BUY-SELL AGREEMENTS

If You Own Or Co-Own A Business,
You Need A Buy-Sell Agreement
Planning Ahead

N

o matter how big or small
your business is, you need
to protect yourself and
your loved ones. If you
have been in business for
years and haven’t really thought about
a buy-sell agreement, then it is time
that you did. Over the years, I’ve met
far too many business owners without
a plan in place. These clients will all
tell you not only that having a plan is
important but also that they’ve never
had the time to put one together.
Being unprepared for such events
as premature death, disability, or
incapacity could erase all that you
have worked a lifetime for and make
things especially difficult for the family
members that must sort things out.

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FALL 2016

There are various events in your life
where you could benefit from a buy-sell
agreement. Therefore it is essential for
you to have one in place and modify it
as your circumstances change. For the
purposes of this article, I will primarily
focus on the death of a shareholder as
the triggering event, but there are other
such events that I will also touch on.
If you have not developed formal
documentation that outlines what
will occur upon your death as a
shareholder, you could be leaving your
family and business partners exposed.
Without a proper buy-sell agreement
in place, other shareholders will be
faced with four main options:

•

Close the business

•
•
•

Continue with a new owner
Sell their shares of the company
Purchase the shares from the
deceased owner’s estate

The ideal scenario would involve
buying the shares from the estate of
the deceased shareholder. This would
require funding and the best solution
for this is almost always a life insurance
policy. This guarantees that the money
will be available when needed.
In order for this ideal scenario to
happen, the option of selling shares
to shareholders must be outlined in a
proper buy-sell agreement, designed
and implemented by a trusted financial
advisor. Your advisor would work with