An effective agreement should be drafted by legal professionals and include: Funding a Buy-Sell Agreement with Life Insurance
: Death benefits paid to the buyer are generally income-tax-free. sole proprietor buy-sell plans
For a sole proprietor, a buy-sell plan (often called a ) is a legally binding contract that ensures the business continues and provides liquidity to the owner's estate after their death, disability, or retirement. Without such a plan, the only options are often to dissolve the business or leave it to an heir who may not want to run it. Core Structure: The "One-Way" Plan An effective agreement should be drafted by legal
: The buyer (e.g., the key employee) typically owns the policy on the life of the proprietor and is the named beneficiary. Core Structure: The "One-Way" Plan : The buyer (e
Life insurance ensures the buyer has the funds to fulfill their legal obligation to purchase the business.