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.