Buy/Sell Protection Plans
Purpose
Every private company should have a Unanimous Shareholder Agreement (USA) and Buy/Sell protection should be an integral part of every USA.
- You may be best friends with your partner(s) now, but are you sure that will be the case forever?
- What happens if you each have different views on how and when to grow the company?
- If different ages, what happens when one partner wants to retire?
- If your partner dies, do you want to be in business with their spouse/kids?
- If one of you becomes disabled, can the company still pay their salary indefinitely?
Structure and Tax Implications
- How should your USA be structured?
- Are the shares purchased by the remaining partner or are they redeemed by the company. There are tremendous differences in the tax implications of each approach.
- View our Overview of Buy Sell Agreements.
Funding Options
- Can you afford to purchase the shares of your partner?
- What is the net cost of buying the shares with cash, borrowing the funds?
- If you use a life insurance plan, who should own the policy?
- What is the best type of insurance?
- Can you make a policy serve ‘double-duty’?
- Have you considered disability insurance or critical illness to fund a buy/sell?
There is a myriad of questions to be considered. Erven Planning Inc. has helped many companies structure a well-designed, affordable plan. We work with your lawyers to develop a plan that best suits your needs.