Buy/Sell Agreements Make the Best Insurance Policies

Buy Sell Agreements Can Be the Best Insurance Policies

Risk management is a pretty common objective for small business owners.  Once a business becomes viable, protecting what you worked so hard to build is usually a priority.  As COVID-19 has shown us, so many things could go wrong in the life cycle of a small business that it makes sense to limit risk wherever possible.

The first place many business owners will look is to the insurance industry.  Errors & omissions, malpractice, general liability, and standard business owner’s policies can be great ways to limit risk in specific areas of your business.  Insurance usually won’t help you much with planned or unplanned successions, though.

What happens when it’s time to retire?  Who might be willing to buy your stake in the business?  How do your partners feel about that?  How will your business be valued at the time?  And what happens if you’re forced into retirement involuntarily?

This is where buy sell agreements come into play.  They may seem mundane, but buy sell agreements are an important component of risk management in any small business.

In our financial planning practice there are a few common mistakes we see with buy sell agreements.  This post will cover those mistakes, as well as the standard provisions we tend to see in effective agreements.

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