Buy-Sell Life Insurance in Eden Prairie
If you own a business with one or more partners, you’ve probably put a lot of thought into building it — but have you thought about what happens to it if one of you unexpectedly passes away?
A buy-sell agreement funded by life insurance is one of the smartest protections a business partnership can have. At Selections Insurance Agency, we help business owners in Eden Prairie and across Minnesota put the right coverage in place so that everyone — partners, families, and employees — is protected when the unexpected happens.
Request a quote or contact us at 952-934-3621 to get started.
What Is a Buy-Sell Agreement?
A buy-sell agreement is a legally binding arrangement between business partners that determines what happens to a partner’s ownership share if they die, become disabled, or otherwise leave the business. Think of it as a business prenuptial agreement — it sets the rules in advance so there’s no confusion or conflict during an already difficult time.
Without one, a deceased partner’s share of the business could pass to their spouse or family members who have no interest — or no ability — to run the business. That can create serious complications for everyone involved.
Where Life Insurance Comes In
A buy-sell agreement is only as strong as the funding behind it. Life insurance is the most common and cost-effective way to fund a buy-sell agreement. Here’s how it works:
Each business partner takes out a life insurance policy. When a partner passes away, the life insurance payout gives the surviving partners the cash they need to purchase the deceased partner’s ownership share — at a price that was agreed upon in advance. The deceased partner’s family receives fair value for their loved one’s stake in the business, and the surviving partners retain full control.
It’s a solution that protects everyone at once.
The Two Most Common Structures
Entity Purchase (Stock Redemption) — The business itself owns the life insurance policies on each partner and is named as the beneficiary. When a partner dies, the business uses the payout to buy back that partner’s ownership share directly.
Cross-Purchase — Each partner owns and pays for a policy on the other partners. When one partner dies, the surviving partners use their policy payouts to purchase the deceased partner’s share from their estate.
Each structure has different tax and legal implications, and the right choice depends on factors like the number of partners, the business structure, and your long-term goals. We’ll help you understand your options and work alongside your attorney or financial advisor to make sure everything is set up correctly.
Why It Matters
Without a funded buy-sell agreement in place, businesses can face:
- Disputes between surviving partners and the deceased’s family
- Forced liquidation of business assets to settle the estate
- Loss of key clients or employees during an uncertain transition
- An unfair outcome for everyone involved
With the right plan in place, none of that has to happen.
Let’s Build the Right Plan for Your Business
Every business partnership is different, and there’s no single policy that fits every situation. We’ll take the time to understand your business, your partners, and your goals — and help you find coverage that protects what you’ve worked hard to build.
Request a quote or call us at 952-934-3621 — we’re here to help.