Business Resilience · Authority Guide
Funding the Buy-Sell Agreement
Buy-sell agreements between partners require funding to be enforceable. Life insurance is the most common funding source.
Executive summary
Buy-sell agreements between partners require funding to be enforceable. Life insurance is the most common funding source.
- Cross-purchase: each partner owns policy on others
- Entity-purchase: company owns policy on each partner
- Hybrid for 3+ partners
Key takeaways
- Cross-purchase: each partner owns policy on others
- Entity-purchase: company owns policy on each partner
- Hybrid for 3+ partners
- Review annually as valuation changes
Key strategies
Strategy 1
Cross-purchase: each partner owns policy on others
Strategy 2
Entity-purchase: company owns policy on each partner
Strategy 3
Hybrid for 3+ partners
Strategy 4
Review annually as valuation changes
Pro-tips checklist
- Get business valuation done every 2 years
- Match coverage to current valuation
FAQ
What happens without buy-sell funding?
The surviving partner may need to buy out heirs from cash flow — often impossible at fair valuation.