If you’re a business owner, insurance can help provide not only protection, but opportunity when it comes to growing your business. Life insurance policies can help protect shareholders and their family members, the corporation itself, as well as key persons to the business. It can also help enhance cash flow to the corporation by assigning the policy as collateral for a loan. Let’s take a closer look.

Shareholders’ Agreement

A shareholders’ agreement is one of the most important documents for a business to have because it addresses several important aspects relating to share ownership, such as:

  • Issues relating to who can own/buy/sell shares

  • What happens upon the death/disability or bankruptcy of a shareholder

  • Typically contains right of first refusal and methods of dealing with offers from third parties

  • Other issues such as dividend policy, employment terms, non-competition, etc.

In corporations with multiple shareholders, a well-crafted agreement will allow for a smooth transition after the death of a shareholder. Even very successful businesses oftentimes do not have the funds available to buy out a significant shareholder, and without that funding, the spouse or child of the deceased could become partner even if that is not a desirable outcome for all parties involved.