Hybrid Purchase Note Corporate Redemption

Mississauga Insurance Solution Provider for Small Businesses

The fourth type of Buy-Sell Agreement is actually a combination of the Promissory Note and the Corporate Redemption. The longer name is “Hybrid Purchase Note Corporate Redemption” It involves both corporate-owned life insurance and a direct sale of the deceased shareholder.

Concluding Remarks

  • Determining which of the four methods is best suited to your company’s situation will be discussed in our meeting as we will conduct a thorough business analysis. Once that is completed, we can start putting together the solution(s) for the protection of your company and shareholders.
  • To avoid confusion and potential conflict later, the buy-out process methodology must be properly documented in the shareholders’ agreement. The methodology shall utilize the best type of policy that will minimize cost, while maximizing corporate income growth and tax efficiency.
  • Keep in mind that It is not limited to just life insurance, but the agreements may also include events such as a critical illness, and a long-term disability. The type of policy will depend on the objectives and the features offered within the policy through the pre-determination of the needs of the partners/shareholders.

Not just any policy will do. Based on your needs, the selection of right insurance company, the right product with the proper added features is essential to funding a buy-sell agreement.

What companies want is:

  • Affordability. Getting the greatest value from the protection therein.
  • Flexibility. Business isn’t always smooth sailing. Companies want flexible premium arrangements including the ability to have a paid up policy whenever it desires.. Policies with added features such as critical illness may be also important for those uncertainties in life.
  • Valuation Flexibility. As the company grows, You may want a policy that grows with it without having to take out additional policies. The company should have the option to invest within the policy as well, to build cash values within the policy. Not only is this tax effective, it can also significantly increase the valuation of the company, thus making the company attractive to lenders or possibly buyers down the road whenever as an exit strategy.

Insurance Solutions and Strategies by OWNSURANCE

For Business Succession Planning, Contact OWNSURANCE in Mississauga, Ontario

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