When a partner in a business dies, the disposition of his or her business interest often creates many problems for his heirs as well as the remaining partners. There are many important issues that have to be dealt with. Who will purchase the shares of the deceased? What is a fair price for his shares in the business? Where will the funds come from?
These problems are easily resolved if a buy-sell agreement has been established.
A buy-sell agreement provides that:
Someone (e.g., the business entity, key employee, or the surviving partners) will purchase the deceased owner's shares at an agreed-upon price.
The deceased owner's estate is obligated to sell the shares at that price.
This example illustrates the need of a buy-sell agreement.
Acme Metric Hammers is a partnership with three owners; George, Howard, and Stanley. If George was to pass away, his shares in the company would be passed on to his son Harry. Harry does not have experience in running the business and both Howard and Stanley dislike the idea of sharing the company with him. It is reasonable to assume that if one of the other two partners passed away, George would feel the same way about their heirs. Setting up a buy-sell agreement will ensure the remaining partners attain full control of the company. It also assures the deceased that his heirs will receive a fair price for his shares.
Where will the funds come from?
All that remains are the funds to purchase the deceased shares. Having to suddenly liquidate a large part of the business to pay off the heirs of the deceased can be very damaging to the company. In the case where a partner passes away, the death benefit will help pay for his shares in the company.
With no money to lay out and with very minimal risk, Life Insurance is the most effective and cost-efficient strategy to help partners plan for the future.
Please contact us today for your no-obligation consultation. We look forward to helping you and your family.
To learn more simply fill out this form or call us at 416-364-2929 or 1-866-566-2001.
"At Crown Medical Clinic, we strive for the highest standard of healthcare, in a clinic devoted to wellness and prevention. I recognize the importance of financial wellness as well, so I refer interested patients to Mark Halpern for insurance and related financial matters. This satisfies an essential need in us all which, as physicians, we cannot supply."
Dr. W. Ronald Porter, M.B., Ch.B.
Medical Director
Crown Medical Clinic
"It was a pleasure working with Mark. He was extremely professional and had a definite interest in the well being of my family, and protecting us against unforeseen harm. Mark took the time to work with me on various options, and we achieved the right protection for my family."
Grant Cansfield
Partner
Aird and Berlis LLP
"I called Mark after hearing him many times on the radio. Operating a growing family business in building restoration and expecting my first child soon got me thinking about how I must take care of myself. Even more so, my father passed away last year and I wanted to make sure that my family and business would survive if I got sick or died. Meeting with Mark was a definite eye opener in terms of my position in life now and in the future. He helped me evaluate all of the potential problems that could come up and provided me with the right solutions that I needed to take care of any unforeseen problems. He organized our group health benefits, mortgage financing and got us started with RESP's. He is now looking after all of our insurance protection programs. The experience was simple and smooth. Working with Mark was a truly educational experience."
Jason Gheda
President
SST Group of Construction Companies Limited
"On the frontline of healthcare, I witness what happens everyday to families struck by serious illness or death. It had been a long time since my own planning was comprehensively reviewed so I called Mark knowing he had a lot of experience dealing with other healthcare professionals. He brought to my attention several areas of weakness and risk and helped choose the appropriate programs to protect me and my family. What struck me most was Mark's caring approach and professionalism. I have already started referring him to my colleagues."
Dr. Richard A. Seeley
Chief of Staff, St. Peter's Hospital
Hamilton, ON