With some simple planning, businesses can work to secure their futures from the loss of their owners and key executives.
We work closely with our clients' other professional advisors to provide solutions that help protect the future of their businesses. We focus on the following ways to protect your businesses and transfer its ownership:
- Buy/Sell Plans
- Cross-Purchase Plans – These buy/sell plans are typically used when there are three owners or less. Each owner owns policies on his/her other partners to be used to purchase the partner’s ownership from the partner and/or partner’s estate.
- Stock Redemption Plans – These buy/sell plans are used when there are more than three owners. In this case, the company owns policies on each of the owners to be used to purchase the partner’s ownership from the partner and/or partner’s estate.
- Key-Person Plans – This coverage can vary from extra coverage on hard-to-replace owners or very key non-owners, such as top salespeople, key managers, etc.
In a majority of cases, life insurance is commonly used. However, it is becoming common to explore lump-sum disability income contracts as well.
Ever since the economic tsunami a few years ago, it has become increasingly harder to obtain credit from banks. Thus, we help our clients to provide the following types of collateral:
- Life Insurance – Banks like to have 100% of the outstanding loan value to be collateralized. The borrower can either assign their existing coverage or take out new coverage. In most instances, new coverage is implemented so that the liquidity that was intended for heirs is not lost.
- Limited Term Disability Income Insurance – Some carriers provide disability income contracts that are designed to fulfill bank notes. Since it is the perfect collateral, banks are known to lower the interest rate on the loan, which can help cover most of the cost for the coverage.
Each company is unique so please give us a call to see how these concepts can work for
you and your company.