If you are a partner in a small business you may have invested a great deal in the business over the years. For this reason your stake in the business could be your most valuable asset, but of course it would not be in liquid form. So when you’re planning your estate the matter is a bit challenging because it is likely you would want to spread the value of the business among multiple heirs.
Your first thought along these lines would be that your family is going to have to sell the business share should you pass away and then divide the proceeds. But what about your surviving partner or partners? Wouldn’t they want to have a say in who they work with going forward?
Buy-sell agreements are often used to facilitate a smooth succession when a partner in a small business passes away and they provide a solution to the above difficulties. One very common type of buy-sell agreement is called the cross-purchase plan.
With this plan all the co-owners in the business take out life insurance policies on one another. When one owner dies these combined policy benefits are used to purchase the share that was owned by the deceased partner from his family at a price that was agreed upon by the owners when the contract was drawn up.
If you are a partner or co-owner of a small business you would do well to plan ahead proactively. The first step is to pick up the phone and arrange for a consultation with an experienced Oklahoma City estate planning attorney who has a background successfully assisting small business owners.
Larry Parman
Author, President and Founding Attorney
Parman & Easterday
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