Think about the potential consequences to a business when one of the owners dies.
The best solution for minimizing the impact to the business and to the surviving owner or owners is a buy-sell agreement between owners. Typically this agreement is drafted by an attorney and spells out what will happen to the business in the event of an owner’s death. It can also address other issues, such as disability, divorce, bankruptcy, and retirement.
A buy-sell agreement can be funded with cash, a bank loan, or life insurance. Life insurance can be the most cost effective funding method and provide immediate liquidity when it is needed most.