What to do if you run your own business
Almost everyone understands the idea of life insurance. You pay a premium. When the life insured dies, the insurance company pays out to the beneficiaries. That works well in the many cases where the life insured is employed. But those who run their own businesses, whether as sole proprietors, partners or majority shareholders in a corporation have slightly different needs. In the case of a corporation, the other shareholders face problems of uncertainty in not knowing who will control the shareholding and potentially want to come in and run the business. The answer is to plan for the business to continue after the death of the life insured. Life insurance companies offer buy/sell agreements. The owner nominates someone to carry on running the business after death. The idea is that the parties agree a fair price for the sale when business is good. Firesales never produce good returns. Upon death, the insured value is paid to the business and used by the nominated individual to buy out the deceased’s interest. This money passes into the estate and can be used to buy an annuity or to generate income for the family to use as they think fit. It is a win-win situation all around. Exactly the same arrangement is made in the case of a partnership where all the partners insure each other’s lives and link to a buy/sell agreement. If the partnership is a separate business entity, it can insure the lives of the partners and buy out the interests of any one partner at a pre-agreed price. In the case of a corporation, either the major stockholders insure each other, or the corporation insures all major stockholders and uses the death benefits to redeem the stock at the agreed price. Talk to your insurance agent about the options and look for life insurance online quotes in the internet.