If you own your own business, chances are you've at least thought about the conditions under which you will leave the business and who is going to take over after you're gone.
If you own your own business, chances are you've at least thought about the conditions under which you will leave the business and who is going to take over after you're gone. Business continuation is difficult enough under normal circumstances, but if
it takes place following the unexpected death of a key person or owner, the complications can increase exponentially.
A way to help manage the risk
Company-owned life insurance is one way to help protect a business
from financial problems caused by the unexpected death of a key employee, partner, or co-owner. If the covered individual dies, the proceeds from this type of insurance can help in several ways. Here are some examples.
Fund a buy-sell agreement
A buy-sell agreement typically specifies in advance what will happen if an owner or a key person leaves the company, either through a personal decision or because of death or disability. The death benefit from a company-owned life insurance policy
can be used to purchase the decedent's interest in the company from his or her heirs.
Keep the business going
If a decision is made to continue the business, there may be a period when operations cease while the
survivors develop a plan to move forward. The death benefit can be used to help replace lost revenue or to pay costs associated with keeping the doors open, including rent, utilities, lease payments, and payroll. It may also help the surviving owners
avoid borrowing money or selling assets.
Replace lost income
If a business owner has family members who depend on the income from a business, which simply could not continue if he or she were suddenly gone, the proceeds
from company-owned life insurance could help replace the lost income and help protect the family's quality of life while they adjust and move on.
The appropriate coverage amount will depend on several factors. It could be a multiple of
the business owner's annual salary or the company's operating budget. Don't forget to factor in such details as the cost of hiring and training a successor, where applicable, and any debts that the family may have to repay.
examination of a business and the related personnel should be conducted before the exact amount of coverage is determined.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019
Janney Montgomery Scott LLC Financial Advisors are available to discuss the suitability and risks involved with various products and strategies presented. We will be happy to provide a prospectus, when available, and other information upon request. Please note that the information provided includes reference to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to you to assist in understanding the issues discussed. Neither Janney Montgomery Scott LLC nor its Financial Advisors (in their capacity as Financial Advisors) give tax, legal, or accounting advice. We would urge you to consult with your own attorney and/or accountant regarding the application of the information contained in this letter to the facts and circumstances of your particular situation.
Janney Montgomery Scott LLC, is a full-service investment firm that is a member of the NYSE, the FINRA and SIPC.