You’ve worked hard to make your business successful, but what happens to your assets if you or another owner dies, becomes disabled or wants to retire? A business transition strategy known as a buy-sell agreement (also known as a business continuation agreement) ― is a contract that clearly states how the business assets should be transferred ― can give you control and protect the future of your business.

Farm Bureau can help you develop a business transition strategy today, while you and your business are healthy, to avoid the unplanned sale of business assets.

Funded with life insurance, or other methods of funding, a buy-sell agreement can provide many benefits:

Allows you to maintain control of the business, while surviving owners can be assured funds will be available to buy the deceased shareholder’s interest in the business from his or her estate

Assures the orderly transfer of the business upon your death, while surviving owners can fulfill the obligation they have toward your family

Prevents conflicts and disputes by protecting your business from an abrupt drop in value

The buy-sell agreement that works best for your business depends on the legal structure of your business ― partnership, corporation or limited liability company (LLC) ― and the number of owners. If you have a family business, consider a buy-sell agreement for family businesses. It’s helpful to keep these points in mind:

In a cross-purchase agreement, the business owners agree to buy the deceased owner’s share of the business from the estate. Each business owner is set up to receive the proceeds of the life insurance policies on the other owners.

In an entity-redemption agreement, the business becomes obligated to purchase or redeem the interest of a deceased owner. The business is the beneficiary of an appropriate amount of life insurance on each business owner.

A wait-and-see agreement combines both of the above in a highly flexible strategy that allows the business owners to wait for a triggering event (i.e., retirement, disability or death) to decide which buyer would best serve the objectives of the owners or parties.

Many buy-sell agreements contain disability and retirement buyout provisions; contact an agent to learn more.

A buy-sell agreement, no matter how well it’s negotiated or written, will only be as good as the funding behind it. Without adequate funding, the legal document containing the buy-sell agreement will be of little value. A lump-sum buyout ― funded by life insurance ― is often the preferred method of funding the buy-sell agreement because it’s cost-effective and it provides cash at the moment it’s needed. The life insurance policy’s proceeds are generally received tax-free.

For the buy-sell agreement to work properly, the life insurance policies need to be coordinated with the agreement. Find a local Farm Bureau agent who can help ensure the future success of your business.