Broker Check

Business Owner Strategies

Key Points

  • Employee golden handcuffs
  • A key to buy-sell agreements: funding those agreements
  • Business owners wealth diversification

Which employees have a particularly large impact on the operation of your company?

Key Employee Golden Handcuffs

Are you taking action to keep that key employee?

It might take many months to replace and train an individual of that caliber with such a specialized skill.

Rewarding that key employee for long term commitment, retaining them as they accumulate a reward, and managing your risk against tragedy in the process is one way using life insurance as a type of golden handcuffs that may benefit all parties.

Buy-Sell Agreement Funding

(That’s the key word:  funding.)

Does your business partner’s spouse know a lot about your business?  That spouse may be your partner someday if you’re not prepared.

For a closely held company with only a few owners, the buy-sell agreement may make a lot of sense.

Let's take a company with three owners, for example, each with a 33% ownership stake.  If one owner were to become sick or injured for a long period of time or died, the remaining two owners would want the third owner's equity.  How to accomplish that?

Too many companies have a buy-sell agreement but no or insufficient funding.

Having an updated, executed, and funded buy-sell agreement provides the legal obligations for the parties to buy and sell the equity of the company and the funds (the ability) to execute the agreement.  Collaborating with your attorney, I can help you structure that funding properly and keep it updated.  By the way, did you know we can structure a disability policy to pay a lump sum?

With the spouse of your equity partners likely being the beneficiary of your partner's shares, that spouse will want cash, not to join your company.  A funded buy-sell agreement allows you to offer the cash the surviving spouse/family seeks and for your surviving equity partners to, in exchange, get the additional company equity you seek.

When it's planned correctly, the buy-sell process is quick and amicable, which is what you want. 

Retirement Plans

You may have thought of your company's retirement plan as having three goals; to recruit, reward, and retain your talented employees.

There's another goal you should consider:  diversifying and accumulating your own wealth through that plan and other associated strategies.

Why?  Because you don't want all of your wealth (all of your eggs) in one basket.  Take risks with your company but not with your wealth.  Separate the two so you protect your own interests should your company falter.

There are tax-friendly, investment and insurance-based strategies you can use, if you're interested.

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