When you consider the demands that come with running a business, it’s no surprise that many business owners become overwhelmed when they spend what little spare time they have assessing how financially fit their business really is.

You may have a personal protection strategy and an estate plan in place for your personal assets, but have you ever considered what would happen to your business if you or a business partner were to leave the business either by choice or if forced?

A buy-sell arrangement can help you protect your business and personal financial future.

Buy-sell agreements are designed to safeguard the fate of your shareholding, particularly in unexpected and adverse circumstances such as the death or disability of a business partner, fraudulent activity and even divorce. A buy-sell agreement is a contract between you and your business partner(s) that outlines agreed actions should a trigger event occur.

An important aspect of establishing buy-sell arrangements is pre-planning the funding necessary to buy out the leaving partner at a pre-agreed value. While there are a range of finance options available, buy-sell agreements often favour buy-sell insurance cover for each partner, where the insurance benefit covers the agreed value of the shareholding.

Buy-sell agreements may be tailored to suit all partners, trusts and family members involved.

Without a buy-sell agreement in place, you could be at risk of having to work with someone new who is completely unsuitable. For example, that may be your deceased or disabled partner’s spouse who is not qualified or appropriate to be their replacement. You could also be prevented from taking control of the business due to an unrealistic asking price for your ex-partner’s share.

While it is difficult to imagine the long-term impact of losing a business partner for you and your business when things are going well, it is simply sound business planning to consider the ‘what ifs’ should you, or one of your business partners, be unable to work.

If you would like to know more or if you have any questions about buy-sell agreements and how your business might benefit, email me at jeff@ekofin.com.au and I’ll be in touch, or call 07 5477 5124.

Jeff Ebsworthy is known for helping family-owned businesses, pre-retirees and retirees to make smart money decisions so they can live the life they want…

This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.

Jeff Ebsworthy is an Authorised Representative No. 231824 of Magnitude Group Pty Ltd ABN 54 086 266 202 AFSL No. 22155 and is a financial adviser with EKO Financial Pty Ltd. EKO Financial Pty Ltd ABN 66 116 276 361 is a Corporate Authorised Representative of Magnitude Group Pty Limited ABN 54 086 266 202 AFSL No. 221557.