How do business partner's protect each's interest in the company?
Full Question:
Answer:
One way to be assured that the business will carry on unabated is for Jim and Steve to enter into a buy-sell agreement. The agreement can state that one owner will have the right to purchase the other owner's interests in the business if one of them should die. The agreement may also state what their intentions are if one of the owners should become disabled, retires, divorces, or faces personal bankruptcy. An important part of that agreement is to assure that the funds are available for the remaining owner to make the purchase. Therefore, many buy-sell agreements require the purchase of life insurance. The insurance company sells the business a "first to die" policy that pays a death benefit on the death of the first owner. This ensures that the remaining partner will have the funds available for the buyout.
