Funding A Buy/Sell Agreement
No matter what type of business you own, a Buy/Sell Agreement offers protection to ensure the effective ownership transfer of the business. It provides security for business partners should an event such as death, disability, divorce or retirement occur to any of them.
Proper funding must be in place to ensure a Buy/Sell Agreement is viable. Without proper funding, the agreement can fall apart. There are a number of ways you can fund a Buy/Sell Agreement including:
After-tax capital is invested in an investment earning taxable income. Typically, businesses do not have large sums of liquid assets on hand as money is put to work directly in the business, and as such this strategy may not be realistic.
Borrow the Funds From a Bank
Borrowed money must be repaid using after-tax dollars and the interest on the borrowed funds may not be tax deductible. In addition, loss of a key person may impair the credit-worthiness of the business and other partners, making this option out of reach.
Installed Payments to Heirs by Buyers
Purchasing over time has risks if the business fails, making the principal and interest payments burdensome.
Provides a financing guarantee from the beginning. Death proceeds are generally tax-free and the cash value can be used for funding a buyout due to retirement or disability of one of the shareholders.
Our Investment Advisors work in conjunction with a CIBC Wood Gundy Estate Planning Specialist* and with the business owner's legal council to develop and implement strategies and funding appropriate for each unique situation.
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