What is Business Continuity?
Business continuity encompasses planning and preparation to ensure that an organization can continue to operate in case of serious incidents or disasters and is able to recover to an operational state within a reasonably short period of time.
The ability to fund a buy-sell agreement is a major part of continuity planning and needs to be thoughtfully planned out to insure continuity of the business. Typical uses of funding vehicles are life and disability insurance policies to provide immediate cash flow to the entity and partners.
Strategy When There Are 2 Owners.
Surviving Owner Gets Stepped Up Basis
Complex With 3+ Owners
Unfair With Age Gaps, Health Conditions or Ownership Percentage
Only One Policy Per Owner
Easier to Administer With 3+ Owners
Loss of Stepped Up Tax Basis
Policies Are Exposed To Creditors Of The Business
Special Purpose LLC
Equalizes Funding of Policies
Stepped Up Basis
No Transfer of Value Issues