Buy-sell agreements vital for co-owned businesses

When getting ready to start a corporation, it is important for entrepreneurs to have a plan for what to do when it is time to exit the business.

Charlie Spence, an Edward Jones financial advisor, recently told the Huffington Post that at some point all business owners will exit their business. While the time of that exit could be in the distant future or come unexpectedly, it is good to be prepared. According to Inc. magazine, owners should sign a buy-sell agreement before starting a business.

If an entrepreneur starts a business with a partner, it is important to have a buy-sell agreement in case of unfortunate or unforeseen circumstances such as disability or death. A buy-sell agreement can require that both partners are covered by life insurance, the benefits of which would go to the departed partner’s spouse while the surviving partner would receive the other half of the business.

In the event of disability, the partners can choose to have the insurance benefits go to the disabled partner so that he or she may continue to receive income or have the benefits go to the business in order to protect cash flow.

Exit planning can also come in the form of retirement plans for the business owners and employees, which can encourage staff to remain with the company for an extended period of time.

Melissa Clark
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Melissa Clark

Head of Content & Customer Marketing at Incfile
Melissa sets the vision for Incfile's content marketing and customer relationship management. Melissa has more than 10 years experience in various marketing roles, and a passion for supporting small businesses as they incorporate and grow. She loves sharing information that will help business owners maximize their LLCs, Corporations and Nonprofits. In her spare time, Melissa is an active member of The Junior League and enjoys running half marathons.
Melissa Clark
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