{"id":874,"date":"2018-06-08T07:39:39","date_gmt":"2018-06-08T14:39:39","guid":{"rendered":"https:\/\/ogbornelaw.com\/?p=874"},"modified":"2023-07-24T17:52:12","modified_gmt":"2023-07-24T17:52:12","slug":"is-term-insurance-right-for-your-business","status":"publish","type":"post","link":"https:\/\/webtechs-designs.com\/2023Ogborne\/is-term-insurance-right-for-your-business\/","title":{"rendered":"Is term insurance right for your business?"},"content":{"rendered":"<p>Death is inevitable. Though no one likes to think about their own demise. Consider what would happen if one of your business partners were to pass away. Would you have the\u00a0cash to buy out their share of the business? Adding a buy-sell agreement to your partnership, funded with term insurance, may be a good option.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_76 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/webtechs-designs.com\/2023Ogborne\/is-term-insurance-right-for-your-business\/#What_is_Term_Insurance\" >What is Term Insurance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/webtechs-designs.com\/2023Ogborne\/is-term-insurance-right-for-your-business\/#Structuring_a_Buy-Sell_Agreement_with_Term_Insurance\" >Structuring a Buy-Sell Agreement with Term Insurance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/webtechs-designs.com\/2023Ogborne\/is-term-insurance-right-for-your-business\/#Business_Planning_for_the_Future\" >Business Planning for the Future<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Term_Insurance\"><\/span>What is Term Insurance?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Life insurance policies are available in permanent and temporary varieties. Term life insurance is a policy that is purchased, paid for, and in effect for a set period of time. It has no cash value unless the insured person passes away during the term.<\/p>\n<p>Term insurance is less expensive than a permanent policy. \u00a0Unlike a permanent policy, it is easier to re-evaluate annually. On the other hand, a permanent policy can be borrowed against.<\/p>\n<p>If you and your partner have decided that you will eventually sell your business, a term insurance policy may be a good option. If someone were to die before that time, the surviving partner receives the proceeds of the other\u2019s policy. He can use this immediate cash to purchase the other\u2019s business share according to the buy-sell agreement.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Structuring_a_Buy-Sell_Agreement_with_Term_Insurance\"><\/span>Structuring a Buy-Sell Agreement with Term Insurance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Your death or your partner\u2019s death doesn&#8217;t mean your business has to end. It&#8217;s a good idea to <a href=\"https:\/\/ogbornelaw.com\/services\/business-law\/\" target=\"_blank\" rel=\"noopener noreferrer\" data-cke-saved-href=\"https:\/\/ogbornelaw.com\/services\/business-law\/\">consult with a business attorney<\/a> when structuring a buy-sell agreement.<\/p>\n<p>The three main types of buy-sell agreements are:<\/p>\n<ul>\n<li><strong>Cross-purchase plan.<\/strong> With a cross-purchase plan, each owner purchases a life insurance policy on the other owner(s). Each owner pays the premiums on their policy and is the beneficiary of those policies. When an owner dies, the surviving owner(s) use the money from the policies to purchase the deceased\u2019s share. When there are multiple owners in a business, each owner purchases multiple policies.<\/li>\n<li><strong>Entity redemption plan.<\/strong> With an entity redemption plan, each partner agrees to sell their interests to the business if they die. The business pays for separate term insurance policies for each partner. It is the owner and beneficiary of the policies. If a partner dies, their share of the business passes to their <a href=\"https:\/\/ogbornelaw.com\/business-estate-plan\/\" target=\"_blank\" rel=\"noopener noreferrer\" data-cke-saved-href=\"https:\/\/ogbornelaw.com\/business-estate-plan\/\">heirs or estate<\/a>. The company may purchase it with the proceeds from the term insurance.<\/li>\n<li><strong>Hybrid plan.<\/strong> This is a combination of the cross-purchase and entity redemption buy-sell agreements. The partner must offer their interest to an entity. If the other entity declines the purchase, the surviving partners or co-owners could purchase the deceased\u2019s shares. This could be structured to allow certain employees the ability to purchase the interest.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Business_Planning_for_the_Future\"><\/span>Business Planning for the Future<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Death of a business partner is no easier to <a href=\"https:\/\/ogbornelaw.com\/estate-planning-basics-where-to-start\/\" data-cke-saved-href=\"https:\/\/ogbornelaw.com\/estate-planning-basics-where-to-start\/\">think about than the death of a loved one<\/a>. The simple truth is that it will happen\u00a0and it&#8217;s better to have a plan in place. Whether you&#8217;re starting a new business or your business has been established for some time it&#8217;s important to have the proper legal protection and documents in place. At Ogborne Law, we work with small business owners to protect the\u00a0business so you can protect your family and employees.<\/p>\n<p>Protect your business and the livelihood of your employees. <a style=\"font-size: 16px;\" href=\"https:\/\/ogbornelaw.com\/contact\/\" target=\"_blank\" rel=\"noopener noreferrer\" data-cke-saved-href=\"https:\/\/ogbornelaw.com\/contact\/\">Contact Ogborne Law<\/a> to discuss partnership agreements and buy-sell agreements for your small business.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A buy-sell agreement funded with term insurance can ensure the continuity of your business. Protect your financial security and learn more about this strategy from Ogborne Law.<\/p>\n","protected":false},"author":3,"featured_media":11501,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45,37],"tags":[],"class_list":["post-874","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-estate-planning","category-45","category-37","description-off"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Is term insurance right for your business? - Ogborne Law, PLC<\/title>\n<meta name=\"description\" content=\"A buy-sell agreement funded with term insurance can ensure the continuity of your business. 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