Business ContinuationBusiness ContinuationBusiness ContinuationBusiness Continuation

Business Continuation

What Happens To The Business After You’re Gone?

You’ve spent a lifetime building your business. And, if you’re like other closely held business owners, a significant portion of your wealth is probably tied up in the assets of the business. While investing your earnings back into the business has helped your business grow, it may cause severe liquidity problems upon your death or the death of a co-owner.

Have you taken the time to develop a strategy that helps assure all of your hard work survives the death of you or one of your co-owner?

Consider just a few of the problems you, your family and/or business partners might face without such a strategy:

For your family:

  • Prevents conflict with surviving owners
  • Assures a fair price for the business
  • May set the value of your business for federal estate tax purposes
  • Can provide cash for your estate

For the business:

  • Allows you to maintain control of the business
  • Prevents disputes
  • Assures orderly transfer of the business upon death
  • Provides an income tax-free death benefit to purchase shares of the business

Several business continuation strategies are available:

Cross Purchase Strategy

An agreement between co-owners of a business. Surviving owners purchase pro rata shares of the deceased owner's stock from the estate. To fund the purchase, each stockholder owns, pays premium on and is the beneficiary of an appropriate amount of life insurance on the other owners.

Stock Redemption/Entity Purchase Strategy

The business becomes obligated to purchase the stock or partnership share of a deceased shareholder or partner. The business owns, pays premium on and is the beneficiary of life insurance on each shareholder or partner.

LifeCycle Buy-Sell

Combines the benefits of the traditional stock redemption and cross purchase methods. Provides several benefits, including the ability to supplement retirement income and allocate the premiums as desired.

Section 303 Stock Redemption strategy

A special type of stock redemption plan that can provide cash to the estate of a deceased shareholder in a tax-favored manner. Allows a corporation to redeem a deceased shareholder's stock without incurring income taxable dividends. The potential for dividend taxation upon a stock redemption exists when a business is passed on to surviving family members.

One-Way Buy-Sell Agreement

Allows a single key employee or an outsider to purchase the business outright from the business owner's family using the death proceeds from a life insurance policy following the business owner's death.

Consult your financial Advisor,attorney and other financial professionals for more information about creating a Business Continuation strategythat's right for you.

Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender charges.

Financial Advisors do not provide specific tax/legal advice and this information should not be considered as such. You should always consult your tax/legal advisor regarding your own specific tax/legal situation.