Send us a text

What happens to your business when a partner unexpectedly dies? Without proper planning, their spouse might show up at your office the next day, declaring themselves your new business partner. This nightmare scenario plays out more often than you might think.

In this deeply practical conversation, we explore the critical difference between having life insurance and having the legal framework that makes it work. Many business owners make a dangerous mistake: they secure life policies but neglect the formal buy and sell agreement that ensures those funds properly compensate a deceased partner's family. Without this legal foundation, surviving partners can receive insurance payouts with no obligation to transfer those funds to the deceased's estate—leaving families with nothing while the business continues without them.

We break down exactly how a proper buy and sell arrangement works: partners take out life policies on each other individually (not through the company), and when one partner dies, the insurance pays out to fund the purchase of shares from the deceased's estate. This creates a clean transition that protects both the business and the partner's loved ones. We also tackle challenging scenarios like uninsurable partners, explaining how payment plans can be structured over 36-60 months to accommodate these situations.

Your business documentation must work harmoniously—shareholders agreements, MOI, and buy and sell agreements should "sing from the same hymn sheet." The life insurance coverage must reflect current business valuations, requiring reassessment every few years. We also explore tax implications, insurable interest requirements, and why professional guidance is essential throughout this process.

Ready to protect what you've built? Take action now to ensure your business partnership has the proper agreements in place. Your legacy—and your family's financial security—depend on it.

Support the show

Please subscribe to our podcast or have a look at our website
www.growthfp.co.za