Smooth ownership transitions. Continuity of operations.
Smooth ownership transitions. Continuity of operations.Essential planning tool to help enhance the stability and financial value of a closely held business.
Overview
A funded buy-sell agreement is critical to any multi-owner business. The buy-sell agreement can ensure company ownership continues in a manner that is in the best interests of the company and fair to the owners by spelling out what happens under different triggering events.
Here’s how it works: A buy-sell agreement consists of three common elements
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Highlights
Play Keep Away
keep stock away from people you don’t like (for example, ex-spouses or greedy heirs of a deceased owner).
Orderly Transfer
– ensures a reliable process for how a business interest will be transferred.
Set Provisions
create provisions to remove owners under certain circumstances.
Valuation
a consistent method and timeframe to update company valuation
Funding Method
include a funding method, such as insurance, to facilitate the purchase of an owner’s interest.
Advisor Challenges
Access to Written Agreement
Ensuring everything that is needed for an effective buy sell agreement, is ultimately in the agreement.
Valuation Uncertainty
Surveyed business owners expect the monetized value of their business to fund 70-80% of their retirement. Yet, they have no idea what their business is worth! Recent studies show 98% of business owners have no clue what their business is worth.
Getting Funded
Most agreements, if a formal one is in place, never become fully funded entirely. Although many plans remain completely unfunded, underfunded plans leave gaping holes for triggering events like disability or death.
Staying Funded
As businesses change, so can purchase agreements, and buy and sell funding requirements. Understanding the original need, and more importantly, the current need, can be difficult to manage.
Access to Written Agreement
IAPP produces a turnkey buy-sell agreement with all the main provisions for a successful plan. Additionally, clients can provide their own buy-sell legal agreement if they choose, or have their attorney make updates to our template.
Valuation Uncertainty
We give business owners and their advisor the ability to run an informal business valuation – unlocking the mystery of their business value and becoming part of the 2% that know.
Getting Funded
Through IAPP, advisors are empowered to place life and/or disability buy out insurance to ensure the plan is fully funded.
Staying Funded
IAPP makes it easy to see all policies placed through the technology and see what gaps in coverage arise due to ownership or valuation changes.
Client Results
Company 3
Challenge
Instructions for the orderly transfer of owner’s business interests. Protection is typically provided for the 4 Ds – departure (termination or retirement), divorce, disability, and death.
Solution
Reduce costs and accelerate your business more efficiently on a fully integrated platform. Use IAPP as the ultimate solution to modernize and simplify planning for advanced insurance concepts.
Strategy
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Company 1
Challenge
As co-founders of a promising tech startup, we faced an unexpected tragedy: the sudden and untimely death of one of our partners. With no plan in place for such a devastating event, our company was thrown into chaos. After the loss, we engaged in legal battles with the deceased partner’s spouse over the valuation of the company, adding further strain to an already difficult situation.
Solution
In the wake of our devastating loss and the subsequent legal battles over our company’s valuation, we realized the urgent need for a concrete plan to safeguard our company’s future. We decided to create a Buy-Sell Agreement, leveraging the expertise of IAPP to streamline the process. With its user-friendly interface and comprehensive guidance, we were able to establish a robust framework that would protect our company and our partnerships in the face of unforeseen circumstances.
The Buy-Sell Agreement outlined clear procedures for the transfer of ownership and valuation of our company, ensuring transparency and fairness for all parties involved. We learned from our past mistakes and took proactive measures to assign a value to our company, eliminating the ambiguity that had fueled our previous legal battles. Additionally, we revisited our insurance policies and updated them to accurately reflect the true value of our company, providing an added layer of financial security.
Strategy
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