Who is going to become your business partner if a major shareholder dies?
In most cases your business partner’s share of the business will be inherited by their family – making them your new business partner! Most business partners could not afford to immediately purchase their partner’s share in the business if they were to die. This means that in many cases the wife, husband or children of the deceased partner become the new shareholder.
This situation can be avoided by putting in place a legally binding “Buy/Sell” or “Share Purchase” agreement that enforces the transfer of a deceased partner’s share in the business to the surviving partner(s). Life Insurance is the cheapest source of funding for agreements of this type and it also means the funds are available to transfer the shareholding as quickly as possible.
Total and Permanent disability insurance should also be a component of a buy/sell agreement to ensure transfer of a partner’s shareholding if they are no longer able to work due to disability.
Holdfast Life & Invest Pty Ltd provides insurance advice expertise and can refer you to expert legal and accounting professionals to assist you in putting together a tailored buy/sell agreement to suit your business.