Protecting a Business Partnership
If a business partner dies, a Buy-Sell Agreement protects the business and remaining owners from inactive, uninformed, and potentially dissident shareholders and helps consolidate control in the hands of the agreed upon group. Additionally, it helps fix the value of each owner’s business interest. From the viewpoint of the heirs of a deceased business owner, a buy-sell severs their dependency on the surviving owners and the economic fortunes of a business that has lost a key person.
Proper Funding Is Essential to the Agreement’s Effectiveness
It’s important to note that a buy-sell agreement is useful only to the extent it is adequately funded on the date of the “triggering event.” Wealth Impact Partners can guide you in the process of developing and funding a buy-sell agreement suited to the needs of your business. The ideal buy-sell agreement is funded and prepared in a manner that is easy for the parties to understand, is reasonably priced, is easily administered, and will not adversely affect the working capital or credit position of the business or professional practice.
KEY PERSON INSURANCE
Protecting Your Client’s Business Against the Loss of Key Employees
The death of a key person can result in serious consequences for your client’s business. Credit could be substantially impaired, or even worse, loans would be called if the key person was a co-signer. The loss of that “intangible asset value” represented by the key person may be greater than that caused by a fire, flood, or other catastrophe.
When insuring a loss through death, Key Person Life Insurance can provide an important source of revenue replacement. Further, the insurance can be designed to accumulate reserves that may be used ultimately for retirement, a termination replacement, or the retraining of successors.
Split Dollar Plans
Many companies design their Key Person coverage as a Split Dollar Plan which has the potential for enhanced tax treatment under the 2017 Tax Act. This is an arrangement between an employer and an employee to share the costs and benefits of a life insurance policy. These plans are widely used in gift and estate planning and can be an important part of the compensation package for key executives.
Essentially, the Business Planning tab will have sub-tabs that read as follows:
- Business Planning
- Qualified Plans
- Executive Compensation Planning
- Buy Sell and Key Person Plans
- Succession Planning
- Business Valuation
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James River Wealth Advisors
15521 Midlothian Turnpike, Suite 100
Midlothian, VA, 23113
P: (804) 302-0502
Securities offered through J.W. Cole Financial, Inc (JWC) Member FINRA/SIPC. Advisory Services offered through James River Asset Management LLC. James River Wealth Advisors and James River Asset Management LLC are unaffiliated entities of J.W. Cole Financial.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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