Buy and Sell Agreement - PowerPoint

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Buy and Sell Agreement - PowerPoint Powered By Docstoc
					Disability Buy Sell Insurance
If one or more business partners
 becomes disabled...

   Would they want to sell your share of
    the business?
   Would they want to buy out the
    partner?
   How would the price be determined?
   Where would the money come from?
   Is it guaranteed to be there when it’s
    needed?
                               What are the odds ...

                          25
Occurrence per Thousand




                          20
                                    Death   Disability
                          15

                          10

                          5

                          0
                               27     32      37      42      47   52   57
                                                Current Age



      Source: 1980 CSO, 1985 CIDB Table B
Consider the likelihood...
Chances of a Disability Lasting 12 Months
       or Longer (before age 65)
Age 2 Owners 3 Owners 4 Owners
 27     26.3%        36.7%        45.7%
 37     24.5%        34.5%        43.1%
 47     20.7%        29.4%        37.1%
 57     12.1%        17.6%        22.8%


 1985 Commissioner’s Individual Disability Table B - Equally
 Weighted 90 Day Elimination Period.
In the event of a disability, there
are many issues to be resolved
The disabled partner may:
 Become a drain on income while not
  contributing to the business
 Have different priorities for the business
  income and profits and may not want to
  reinvest profits
 Decide to let spouse or relative take over
  their role in the business
 In the event of a disability,
there are many issues to be
          resolved
The healthy partner:
 May not be able to pay the disabled
  partner an income and maintain the
  business
 May not have funds to buy the
  disabled partner out
 May not want to share business
  decisions with the disabled partners
  family
   A properly funded
   buy-sell agreement
        between
owners will address these
         issues.
    Funding alternatives...

 Current cash flow
 Establish a sinking fund

 Borrow the funds

 Disability Buy-Out insurance
The most practical solution is...

   A written agreement
    that specifies when
    and for how much
    the buy-out will take
    place, and...
   is funded with the
    right amount of
    Disability Buy-Out
    insurance.
    Primary types of buy-sell
          agreements

 Cross purchase
 Entity purchase
           Cross Purchase Agreement...

                          Buy-Sell
   Business              Agreement   Business
   Owner A                           Owner B

Policy and Disability     Premium
                                       Policy and Disability
Benefits on Owner B
                                       Benefits on Owner A

                        Insurance
                        Company
    Entity Purchase Agreement...
                            Buy-Sell
     Business              Agreement        Owner A

Premium   Policies and          Buy-Sell
          Disability Benefits   Agreement
          on Owner A & B




     Insurance                              Owner B
     Company
     Advantages of an
       agreement...
Disabled Owner
 Assures a definite price and buyer

 Financial future is no longer
  contingent on business success
      Advantages of an
        agreement...
Healthy Owner
 Avoids negotiation of price

 Assures complete and orderly
  transfer of ownership
 Retains control of the business

 Provides continuity and credibility
  for customers and creditors
     What will be provide to you
   Assessment of the current program
   Sample Agreements
   Design options
   Cost Benefit Analysis
   Implementation steps
     All we need is the following
   Current financial information
   Copy of any current agreements and/or
    funding
   Owner’s date of birth, percentage of
    ownership and health information

				
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