As an owner of a business, you can negotiate a buy out or exit strategy while you are alive, but what if you or a partner dies or becomes disabled? Who is going to own the business going forward and how will it be funded? How will the deceased’s loved ones receive full value for the asset that has been built up?
A succession agreement granting the continuing owners the option to buy a deceased or disabled owner’s interest in the business, and a lump sum of cash to buy the outgoing owner’s interest funded through business protection insurance. Business protection insurance can provide a unique and cost effective solution to the problem of funding. What makes it unique is that it can provide the required purchase price in the event of an owner’s death, disablement, or diagnosis of a major medical condition, at a fraction of the cost of alternative funding options.
This would allow for a smooth transition of the deceased owner’s asset to the surviving shareholders and a lump sum paid to the deceased’s loved ones. The pre-agreed amount of lump sum can be the market value of the business as agreed in writing by the owners.
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Taking out insurance is sound financial management. Wealth protection is as important as its creation, and much easier and quicker to achieve. For further information and an assessment of your own personal needs, contact Star Financial Services.
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