Most business owners know they need one; however, I still meet with business owners weekly who do not have a formal business continuation plan in place. Owners can be most prepared for the futures of their firms by consulting with attorneys to draft buy-sell agreements.
The next step is to consider ways to fund the agreement and avoid unintentional tax consequences. When set up correctly, life insurance is an economical way of funding buy-sell agreements. At pennies on the dollar of coverage, it’s usually affordable and practical, but there are pitfalls on the way to a successful continuation plan.
Let’s explore six topics business owners need to understand to help them avoid the mistakes commonly made related to using life insurance to fund business continuity: