There are many different methods for supporting your business succession plan, or the plan in which you discuss how the ownership of the business will be transferred or methods for determining the business’s value and individuals who will take it over.
A cross-purchase agreement is one such option. These agreements are structured so that every partner purchases and owns a policy on the other partners. This means that every single partner is an owner and a beneficiary on the same policy, with the other partner being the insured individual. When one partner passes away, the face value of each policy on the deceased partner is thus paid out to the remaining partners.
Those individuals then use the proceeds from the policy to purchase the deceased partner’s share of the business at a previously agreed on price. This is just one method for complimenting your business succession plan and it is one that should only be discussed with an experienced New Jersey business succession planning attorney. These vehicles can accomplish your goals but they can be relatively complex and easily misunderstood if you do not work with the appropriate attorney.