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Every business owner will eventually get out of the business. In the absence of a child or other relative who can take his or her place, an owner needs to plan for the sale of his or her ownership interest. Ownership in a small business often has little market appeal to anyone other than those already involved in the business. Consequently, the obvious buyers are the remaining owners. A buy-sell agreement guarantees a buyer for a retiring or deceased owners interest in a business, thereby allowing the owner (or the owners heirs) to recover his or her investment. The agreement also fosters the continuation of the business by not allowing the departing owners interest to fall into the hands of outsiders - persons who may not be qualified to run the business or who may be incompatible with the remaining owners UNDER A TYPICAL AGREEMENT, THESE CONDITIONS APPLY If an owner wishes to retire, he or she must first offer to sell the interest to his or her associates, or to the business itself, before selling to a third party. * Upon the death of an owner, the surviving owners or the business must buy, and the estate must sell , his or her interest. STOCK REDEMPTION OR CROSS-PURCHASE Stockholders implementing a buy-sell arrangement must generally chose between a stock redemption plan and a cross-purchasing agreement. Under a stock redemption plan, the corporation agrees to redeem the shares of a stockholder at his or her retirement, death or, perhaps, disability. The redeemed shares become treasury stock. To fund the redemption, the corporation owns and is beneficiary of a life policy insuring each stockholder. Under a cross-purchase agreement, the stockholders agree to purchase the share of a withdrawing or deceased stockholder. To fund the purchase, each stockholder owns and is beneficiary of a policy on the life of every other stockholder. There are no fixed rules for determining which type of buy-sell agreement is most appropriate for stockholders' particular needs and objectives. However, each type of arrangement has advantages that the stockholders need to consider. Article by: Insurance Finder Tags: business insurance ownership health insurance for business owner business owner health insurance business owners health insurance health insurance for business owners care business owner care business owners insurance for independent business owners care for business owners small business owner health insurance health insurance for small business owner disability insurance for business owners business owners insurance agency insurance for business owners business owners insurance insurance for small business owners small business owners insurance health insurance for small business owners small business owners health insurance insurance for business owner business owner insurance insurance for small business owner small business owner insurance medical insurance for business owners business owner medical insurance life insurance for business owners care for small business owners business owner life insurance health care for small business owners medical insurance for small business owners affordable health insurance for small business owners dental insurance for small business owners business owned life insurance group health insurance for small business owners business owners liability insurance business owners insurance policy business owner policy insurance business ideas business advice business idea starting business starting your own business starting a business selling business startup business business entrepreneur business buisness business insurance sales business insurance company business finance business insurance consultant business consulting business insurance costs business insurance companies business insurance law business insurance sample business insurance forms business marketing ownership contracts contract ownership ownership agreement business franchise business insurance terms company ownership business insurance form commercial insurance insurance companies |
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