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Plan for business continuity with a buy–sell agreement

Many businesses fail to plan for the untimely death of a business owner. Whether your business is a sole proprietorship, a partnership or a close corporation, the death of a business owner can prove to be costly to your business and your family.

Desjardins Insurance can help. With the use of life insurance combined with a buy-sell agreement, cash can be made available in order to assist with the orderly, economical adjustments following the death of a business owner.

Talk to your Desjardins Agent for more information. However, keep in mind that before any decision is made, you should consult your tax advisors and ask a lawyer to prepare any business documents that may be needed.

Personal funds of owners

Most businesspeople do not keep large sums of liquid assets that would be needed to purchase the deceased owner's interest. Most money would be in their businesses.

Sinking fund

The premature death of an owner may not give the business time needed to accumulate the purchase price.

Borrowed fund

A bank may not be willing to lend money to a business that has recently lost an owner or the cost of the interest of the loan may be excessive.

Installment payments

The heirs of the deceased owner may not get the sum of money needed to settle death costs and there is no guarantee future payments will be received if the business fails.

Life insurance

There are many advantages to life insurance that other alternatives do not offer:

  • Annual premiums are often a small fraction of the death benefit.
  • Death benefits are available when needed, regardless of when the owner dies.
  • Death benefits are generally tax-free.

The amount of cash value available will generally depend on the type of permanent policy purchased, the amount of coverage purchased, the length of time the policy has been in force, premiums paid to the policy and any outstanding policy loans. Unpaid loans and withdrawals will reduce the death benefit and policy cash value. Loans also accrue interest. There may be tax consequences associated with policy loans. Desjardins Agents do not provide tax or legal advice. Please consult your tax or legal advisor regarding your specific circumstances.

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