Technology company owners, and the general partners of a real estate LLC, must enter into formal legal agreements with each other to transition ownership if one of the owners dies or becomes disabled.
The legal agreements are called “buy-sell” agreements, are funded by life insurance. Generally, the company owns the insurance policies, and the company pays the premiums. Sometimes, it is more advantageous for the executives to pay the premiums.
The death benefits are used to buy the owner’s shares from the family estate, and are either returned to the company, or increase the ownership interest of the surviving owners.
Investors who may be contemplating an investment in your company will want to see this agreement in your private placement memo to cover their risk that the company will continue to operate if one of the owners dies.
Questions? Call Laurie Thomas Vass. 919 975 4856.