No details needed. Start with the question on your mind.
THE BUSINESS OWNER’S NOTEBOOK01
Two decisions. One workable plan.
01
The agreement
Who buys? At what value? When?
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02
The funding
Where does the money come from?
Bring the agreement and the money together.
THE STARTING POINT
A buy-sell agreement sets out what happens to an ownership interest when a specified event occurs. Funding is the money needed to carry out that agreement. [1]
01
The people
What happens to the departing owner, their family and the owners who remain?
02
The agreement
What event starts a buyout, how is the price set and when is payment due?
03
The money
Could the buyer meet that obligation and still keep the business running?
A FEW MINUTES. BETTER QUESTIONS.
Start with a situation.
Choose a situation to explore. These are discussion prompts, not an assessment of your business or a recommendation to buy insurance.
OWNERSHIP & FAMILY
The shares need a buyer. The family needs clarity.
Imagine a co-owner dies unexpectedly. The remaining owners want to carry on. The estate may need payment for the ownership interest. The agreement and the available money need to work together.
THE QUESTION TO PAUSE ON
Would the person or business required to buy the shares have the money when payment is due?
Life insurance may help fund a buyout after an insured death. Policy ownership, the beneficiary and the agreement need to be coordinated with legal and tax advice. [1]
Bring these questions to the conversation
Choose any that matter to you.
TIMING & DEFINITIONS
Unable to work does not always mean ready to sell.
Imagine an owner cannot work for an extended period. The business still needs decisions, cash flow and a clear understanding of when, if ever, an ownership buyout should begin.
THE QUESTION TO PAUSE ON
Does the agreement’s buyout trigger line up with the insurance contract’s disability definition and payment timing?
Life insurance alone does not fund a disability claim. Buy-sell disability coverage, where available and suitable, has its own definitions, waiting periods and benefit limits. [1]
Bring these questions to the conversation
Choose any that matter to you.
PLANNED EXIT
A planned exit still needs a funding plan.
Imagine a partner wants to retire or move on. There may be time to prepare, but the buyer still needs a workable payment plan that both sides understand.
THE QUESTION TO PAUSE ON
Could the business fund the purchase without leaving too little cash for day-to-day operations?
A voluntary exit or retirement does not, by itself, trigger a life or disability insurance benefit. Cash, borrowing or agreed instalments may need to do the work. [1]
Bring these questions to the conversation
Choose any that matter to you.
KEEPING THE PLAN CURRENT
Does an old arrangement still fit today’s business?
Perhaps the company has grown, ownership has changed, or new debt has been added. An agreement and insurance arranged years ago may deserve another look.
THE QUESTION TO PAUSE ON
Have the ownership structure, business value and funding arrangements been reviewed together?
A policy’s face amount is not a business valuation. Existing coverage may serve several purposes, so check how much is actually available for a buyout. [1]
Bring these questions to the conversation
Choose any that matter to you.
Where could the buyout money come from?
More than one source may be needed. Each has a different effect on timing, cash flow and certainty.
01Cash reserves+
Money already set aside may be available when needed.
Would using it leave enough for payroll, tax and everyday expenses?
02Borrowing+
A lender may finance some of the purchase. Approval and terms are not assured.
Could the buyer qualify after losing an owner, and afford the repayments?
03Agreed instalments+
Payments can be spread over time if the agreement allows.
Would the seller or estate accept the timing and the risk of non-payment?
04Insurance+
An eligible claim may provide money for a covered death or disability.
Do the insured event, benefit amount and timing match the buyout obligation?
A little more clarity.
Does having an agreement mean the buyout is funded?+
No. The agreement creates rights and obligations. Review the separate funding arrangements, who can access the money and when it would be available.
Who should own the insurance?+
Ownership and beneficiary choices depend on how the buyout is structured. The owners, lawyer, accountant and insurance advisor should coordinate this. There is no single structure that fits every business.
Is buy-sell funding the same as key person coverage?+
They address different needs. Buy-sell funding concerns buying an ownership interest. Key person coverage concerns the financial impact on the business of losing someone essential. Avoid counting the same insurance proceeds twice.
A RELATED QUESTION
Concerned about keeping the business running when an essential person is missing?
I help people make clearer decisions today, before life forces harder ones later.