What Does Entity Purchase Agreement Mean

Ownership of the insurance LLC is equivalent to that of the business unit, and an independent person or corporate trustee should act as manager. Each member of Insurance LLC must make capital contributions equal to the premiums of the life insurance policy for which it is designated as the beneficial owner, in accordance with the member`s purchase obligation under the agreement of sale to purchase of the operating company. If a policy has more than one beneficial owner, each member`s contribution to the policy premiums should be proportional to the member`s total percentage of interest in the business unit (if the purchase-sale provides for a pro-rated purchase). Buyback or cross-purchase contract? A purchase-sale contract can be structured as a buy-back agreement or as a cross-purchase agreement by the surviving owners. In some cases, the deal could be a hybrid of the two. The purchase-sale agreement can take the form of a cross-purchase plan or a pension plan (entity or share buyback). For more neutrality and efficiency of the purchase-sale agreement, the service of a corporate trustee is recommended. If policies were issued before notification was made and consent was obtained, the best option, if possible, is to obtain new policies. If this is not possible, the company may be able to distribute the policies to the insured owners, who could then transfer the policies to the company. Since this could be considered a phased transaction, another option for owners would be to transfer the policies to an insurance LLC. On the other hand, a handling agreement has two main advantages. First of all, it`s simple and fair. The company simply buys the deceased owner`s interest and the remaining owners don`t have to worry about paying the money for it.

Second, when an owner leaves the entity, it`s relatively easy to manage policies…

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