Does Your Business Need A Buy-Sell Agreement?

Entrepreneurs are generally good at one thing when they start their business and that’s generating top line revenue.  Once they create enough top line revenue then they begin to think about how to drive bottom line profitability in their business.  As the equity value of the company grows, most owners never consider some very important planning items because they believe they are invincible.  What happens if my business partner(s) get divorced? What if they die?  What if they become disabled?  Do I want to be working with my partners kids or spouse?   One of the key considerations for most business owners is whether or not to get a buy-sell agreement and get key person insurance. A buy-sell agreement is a legal contract that provides for the sale of an owner’s stake in a business at a ‘trigger’ event.  The sale of an owner’s interest could actually trigger for many reasons including retirement, death, disability, divorce, bankruptcy, or even a conflict ...

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Run Your Family Finances Like A Business

When we opened oXYGen Financial back in 2008, we introduced two very important financial planning concepts.   Number one; in order to be successful with your personal wealth you need to take ownership as the CEO of your family’s finances.   Number two; all successful CEO’s surround themselves with an effective CFO to help run the company, which is why oXYGen Financial pioneered and trademarked the term Private CFO®.    Between the combination of an effective CEO and CFO, you can focus on the key performance indicators in your “business” to help you reach your goals.   I was most intrigued this week when almost five years after our founding, the Wall Street Journal finally ran an article called Family, Inc. (http://on.wsj.com/12YfX8z), which is a really interesting article and can help articulate what families will need to consider as they manage their finances in the future.  Here are my smart money move tips on how to run your family like a business: Get one ...

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Personal Finance 101 – Buy-Sell Planning: Trigger Events and Payment Terms For Buyout

The most fundamental detail of any Buy-Sell Agreement is defining what circumstances will trigger a buyout.  Buyout payment terms should be carefully tailored to each triggering event.  Here are a few common triggering events and some considerations for payment terms. Death. An untimely death is almost universally included in any Buy-Sell Agreement.  Despite being the worst of all possible triggering events, death is actually the easiest event to plan for in a Buy-Sell Agreement.  Life insurance policies in connection with a Buy-Sell Agreement allow an immediate source of liquidity to fund a buyout obligation without burdening the assets or ongoing cash flow of the business.  Given the immediate source of insurance proceeds, a death buyout often occurs as a lump sum payment within a certain time period after the death of the owner.  Immediate payment can also be important for estate tax purposes if the value of the business interest will be included in the deceased owner’s taxable estate and ...

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