Risk Management

A buy-sell agreement, also known as a buyout agreement, is made between the co-owners of a business and addresses the issues involved upon the death or the exit — either forced or chosen — of one of the owners.  It functions like a will for a business.

The agreement addresses the following:

  • What triggers a buyout?
  • Who can buy the former partner’s share?
  • What price will be paid for the equity in the business?

It is not uncommon for a business to fail following the death of a small business owner. Key Person Insurance, which is an insurance policy specifically for an owner or top manager, can help a business stay afloat by paying off debts and covering day to day expenses until a new owner or manager is found.  Premiums for a Key Person Insurance policy are paid for by the company, which will also be listed as the policy beneficiary.

It is important to note that key person insurance is purchased strictly for the business entity. It is not the same as a personal life insurance policy, which provides for the family.