Business Life Insurance – Uses and Applications

By | December 26, 2011

Business life insurance

 

It your business it your business keep going, who would you want your next business partner to be?

 

Business goes on even when the owner dies or becomes disabled. If and when a business owner dies or becomes disabled the business itself may face several problems that if not handled or properly structured could lead to potential conflicts with personnel and business owners. Along with limited growth and financial instability some of those problems or issues that might arise could include.

 

·                     The business interest or share passing to the deceased owners heirs

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·                     The heirs selling the business interest to an outsider or possibly even a competitor in the same industry

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·                     The heirs possibly attempting to take an active role in the management of the company without the proper skills and knowledge to do so

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·                     Your new co-owners not sharing current management’s philosophy or the previous long-term strategies of the prior owner

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How to keep the business in the right hands and the way to you truly intend it to!

 

No one can ever predict all of the financial and managerial conflicts that possibly could occur when a business owner dies or passes away. But by planning a secure and thought-out transfer of your business interest you could possibly avoid or control most problems that typically arise in these scenarios. One of the most common tools to make a plan and thought-out transfer of a business is a buy sell agreement. A proper and thought-out drafted agreement can help it business owner with the following.

 

·                     Make the owners heirs sell the business interest to the surviving owners of the business

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·                     Help establish a way to determine the value of the deceased owners of business interest

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·                     Help create and establish a smooth transition of management and control to the new owners

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·                     Help prevent an outsider or competitor from acquiring the business interest of the deceased owners

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·                     Allow the business to continue as a going concern without a forced sale of assets or property

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·                     Help the business creditors feel more secure that the new owner will survive at the owner’s death

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·                     Helps establish an estate value for the deceased owners business interest

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·                     The deceased owners family will not have the worry of running a business and now with funds to help supplement their interest

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·                     Helps provide liquidity to deceased owners estate to pay taxes and estate costs

 

You could find a buy sell agreement with life insurance

 

but in order for a buy sell agreement to work the business or surviving owner really needs to have the money to fund the life insurance policy. You see a life insurance policy can help guarantee that the necessary money or dollars will and can be available at the precise time when they are needed. Funding a buy sell agreement with life insurance really does have a number of great advantages that will discuss now.

 

·                     Life insurance can be one of the most cost-effective and economic ways to help fund a buy sell agreement

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·                     Typically the death benefit proceeds will not be subject to income tax due to the life insurance regulations and laws

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·                     If it’s a permanent policy the cash value can help find the buyout of an owner due to disability death or retirement

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·                     Last but not least life insurance constraints and the credit position of the business

 

 

 

 

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