Buy/Sell Agreements

Buy/sell agreements, also called buyout agreements, are business contracts that are funded by life insurance or key person insurance. They help businesses minimize financial damages after the sudden loss of a business owner or business partner.

KSA Insurance helps businesses in South Carolina and across the southeastern United States find business insurance policies that protect their business, assets, and employees. Read on to learn more about buy/sell agreements, and contact us today for assistance finding a buyout agreement with the right life insurance policy.

Request A Quote

What is a Buy/Sell Agreement?

Businesses often have one or several key employees that are critical to the company’s success, and their sudden departure, disability, or death can leave the business susceptible to extreme financial damages.

Buyout agreements help mitigate losses by allowing the remaining partners to purchase the lost partner’s stake in the business.

Buy/sell agreements benefit businesses in several ways, including:

Offering an orderly way for businesses to transfer ownership and management
Allowing business partners to execute a fair market value exchange
Giving cash to heirs to help them pay estate debt and other expenses
Ensuring seamless continuity for customers and employees

Types of Buyout Agreements

The two primary types of buy/sell agreements are cross-purchase plans and entity purchase plans:

Cross-purchase plans

Cross-purchase plans involve each business partner purchasing life insurance on all of the other partners. Once a partner dies, the remaining partners use the insurance payout to purchase the former partner’s shares.

Entity purchase plans

Entity purchase plans involve each business owner entering into an agreement to sell their shares of the business. The business purchases life insurance on each of the company’s owners. Once an owner dies, their shares are passed to their heirs, and the business uses the insurance payout to purchase the interest from the owner’s estate.

How to Fund Buy/Sell Agreements

To fund buy/sell agreements, business owners often rely on key person insurance.

Key person insurance, or business life insurance, is a type of life insurance that a business purchases on the life of a critical employee — usually a partner or owner — to protect themselves against financial damages in case the insured employee suddenly passes.

In addition to funding buyout agreements, key person insurance can cover expenses related to:

Hiring
Training
Paying off debts
Paying severance to employees
Funding an orderly business shutdown

Business life insurance helps businesses stay afloat and maintain financial stability following the loss of their most valuable employees.

Get A Quote

Buy/sell agreements are contracts that help businesses secure their futures and protect themselves against sudden and unexpected losses. At KSA Insurance, we work with most major insurance carriers to help businesses find comprehensive life insurance policies that meet their needs and provide financial security. Contact KSA Insurance today to request a quote and learn more about our life insurance offerings.

Request A Quote

Need help? Call now to speak with one of our customer service representatives.

(843) 408-4232

Get In Touch

Sign-up for our mailing list for the latest news and discounts!

KSA Insurance Rated 5 / 5 based on 203 reviews. | Our Reviews