Help Extend the Life of Your Business With a Buy-Sell Agreement

Many small businesses do not survive beyond the first generation. One reason is the lack of planning for the disposition of the business at an owner’s death, disability, retirement or withdrawal. Establishing a formal plan may be one of the most important actions you ever take with respect to your business and ensuring its survival.

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Benefits of a Buy-Sell Agreement

A buy-sell agreement is a legal document between the partners and owners of a business that can help ensure a smooth transition of the ownership of your business.

Helps assure the sale of your business in the event of your retirement, disability or death
Guarantees that your family will get a fair price for the business you have worked so hard to build
Helps assure an immediate transition to future owners, allowing your business to keep moving forward
If properly drafted, your buy-sell agreement will also help set the value of your business for estate taxation purposes and help defend the valuation in the event of a challenge from the IRS.

How to Structure a Buy-Sell Agreement

One way for you to fund this kind of agreement is through a life insurance policy from Lafayette Life. There are two common buy-sell methods such a policy can help fund.

Cross Purchase Agreement — With the buy-sell cross purchase method, each business owner obtains and owns a life insurance policy on the other owners.
Entity Purchase Agreement — In the buy-sell entity purchase method, the business obtains and owns a life insurance policy on the owner(s).

In both cases, insurance proceeds are used to buy the business interest from the deceased owner’s estate according to the buy-sell agreement. This approach can provide the liquidity you need and proceeds may be income tax free.

What You Need to Know About a Buy-Sell Agreement

Read through our information guide to get all the details about a buy-sell agreement.

Buy-Sell Agreement Guide (PDF)

Contact Us To Discuss Advanced Sales Concepts

Beady B. Waddell III

JD, LLM, MBA, CLU^®, ChFC^®
Vice President, Advanced Markets

Katherine D. Goldsmith

JD, CLU^®, ChFC^®, ChSNC^®
Assistant Vice President, Advanced Markets

Marchaun E. Morrison

JD
Assistant Vice President, Advanced Markets

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IMPORTANT DISCLOSURES

The Lafayette Life Insurance Company does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Lafayette Life cannot guarantee that the information herein is accurate, complete or timely. Lafayette Life makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Please consult an attorney or tax professional regarding your specific situation.