Sole proprietorships are one of the most common forms of business ownership today. And while many of these business owners are very successful, they don't always give much thought to what will happen to that business they've worked so hard to build when they die.
When talking with many sole proprietors, the natural answer for what they want to happen to their business is to have one or more of their children, or perhaps a certain key employee, take over the business when the sole proprietor is ready to retire or dies prematurely. But what if there are no children (or no employees) interested in taking over the business? How can you guarantee that your family receives the full value of the business at your death when there is no one to take it over or buy it?
Perhaps you know someone like John, a 55-year-old owner of a printing business. He has one young employee, Bill. Bill is a good employee, but he has no desire to take over the business at any point. John also has no children who are interested in entering the printing business, and his wife doesn’t want to take it on either. When John started his business, he worked hard to build it into a strong asset that could provide for his family and his eventual retirement. Now he’s worried that he or his family will never recoup the value for all his hard work.
As a going concern, John believes the business is worth around $500,000, but he realizes that without him around to run things and bring in new business, the printing shop will end up being closed and the assets sold off for pennies on the dollar. That’s not the end he has envisioned for his life's work.
A Personal Buy-Out Arrangement, which uses a permanent life insurance policy with a face amount equal to the $500,000 John believes his business to be worth, would guarantee that his wife would receive that full value if he dies prematurely. She would then have the freedom to simply lock the doors on the business at his death and sell off any remaining assets. John could also choose to increase the face amount of the policy by an amount equal to six months of Bill's wages in order to help out his loyal employee. After all, Bill would lose his job at John's death when the business is closed. If John lives long enough to retire, the policy’s cash values will help supplement his retirement.
A permanent life insurance policy can be just the ticket for a sole proprietor who wants to guarantee that his family receives some value for all his hard work. Talk to your professional insurance agent today to find out more on how this program can work for you.