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Buy Sell Agreements To Protect Your Business
If you are a partner in a partnership, absent any other planning, did you realize that your partnership will cease to exist upon the death of one of your partners? You become a partner in liquidation and your job then is to liquidate the assets of the partnership, reduce it to cash, for the purpose of paying the deceased partner’s family for the share of the partnership that the partner helped to build. They got to settle the estates, the tax man comes, and they’ve got to take care of it.
So that’s a nightmare. So what do you do? Well, before anybody passes away, you can draw up what’s called a buy-sell agreement. And that’s when the partners get together and they come up with an agreement between them about what happens when one of them passes away. These are often written in conjunction with life insurance policies that provide money that will come in and effectively buy out the deceased partner’s shares so that they can get the money that they need to carry on. And the shares of the partnership come in and then are concentrated within the surviving partner or partners.
It is the right way to go about that. Everybody builds businesses with the dream of having them carry on. You build businesses so you can pass them on to your family members. That’s why we do this. We plow our money and time and effort into it, and it stinks when you see something like that come crashing down for simple lack of planning.