The passing of a business owner often results in the demise of an otherwise successful business simply because of a lack of business planning. While business owners are alive they may negotiate a buy-out amongst themselves, for example on an owner’s upcoming retirement. But if one of them dies it is another matter. The remaining business owners must negotiate with the departed owner’s appointed legal representative, who may be more concerned about the needs of the estate than the current and future needs of the business. Many business owners incorrectly believe this contingency has been catered for in the business’ constitutional documentation but often there is no buy-out provision or if there is, it’s often ineffectually drawn up and inadequately funded. Similar issues arise when an owner is disabled and cannot (or no longer wishes to) be involved in the business.

So what is Buy Sell Insurance or Ownership Protection?

Buy Sell Insurance provides for the continuing owners or their appointed nominees with sufficient cash for the transfer of the outgoing owner’s equity to the continuing owners should a business owner die, become disabled, or suffer a critical illness. Tax treatment of insurance premiums and proceeds The premiums payable on non-superannuation policies which are taken for the purpose of protecting ownership are considered as being non-tax deductible to the business owners. The proceeds are tax-free when the beneficial owner of the policy is the life insured or a relative of the life insured


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