What if something happened to you or your business partner and one of you were unable to continue running your business?
A buy-sell agreement may be the solution you need for your small and medium business to protect your livelihood should you or any of your partners pass away or experience a trauma or disability. This legally binding contract between business partners, facilitates the sale of business ownership when certain ‘trigger events’ including death and disability occur. “While the purchase of shares may be funded personally, it is commonly financed by insurance, which provides ready capital for emergency buy-outs and it can also be a more cost-effective option.”
But what are the chances?
You may be surprised to learn that for businesses with two partners, who are currently aged 45, there is a 55% chance of death, total and permanent disability or trauma occurring before age 65 for one of those partners. While for three business partners it rises to 70%, and for four business partners it is a whopping 80%.*
Insurance for Funding
If you suffer from accident, illness or death, you (or your estate) won’t be forced to sell your share of the business in what is essentially an emergency situation,
It also protects your business partners from having to operate your business with consideration of any terms imposed by your estate or having to work with an unwanted ‘new business partner or from having to suddenly raise funds to pay you out.
How does a buy-sell agreement through insurance work?
Each partner signs a legally binding agreement enabling the sale and purchase of business equity in the event of death, disability or trauma
Each partner also takes out an insurance policy, with the agreement stipulating that if a trigger event occurs, the funds received from the insurance policy will be used to payout their share in the business. This means you, or your estate, would receive the payment, while the remaining partners would receive your shares.
Contact your GFP Adviser to discuss solutions for protecting your business.
*Australian Bureau of Statistics, 2005 Australian Life Table.
Trauma Insurance
Trauma Insurance may provide a financial benefit in the event of serious illness and health conditions, with the major causes of claim being heart disease, stroke and cancer. Most policies, however, generally cover over 30 specified events such as major head trauma,...