If your business has had a lot of success, it is possible that it will continue to run for many years to come, and this may extend well beyond your lifetime. If so, you deserve congratulations on leading such a huge success. As you get closer to the retirement age in Kentucky, you will need to start forming a plan of succession.
Formulating a business succession plan ensures that after you retire or if you face an untimely death, there will be someone else who can take the reins and continue leading the company. For some business owners, their succession plans involve a cross-purchase agreement. What exactly is a cross-purchase agreement, and how can it give you better control over the fate of your business?
A plan for partners
Investopedia states that a cross-purchase agreement is typically involved in a business succession plan where the business was owned in a partnership. It involves both partners taking out a life insurance plan on each other.
The reason for doing so has to do with ownership shares. It is possible that in the event of your passing, your partner would not be able to afford to buy your ownership shares.
By participating in a cross-purchase agreement, business partners can help guarantee each other the option of buying the shares of whoever is the first to die. It is an option that you might consider if you want your partner to remain in control of the business after you are gone.
This article is meant to inform and should not be taken as legal advice.