The agreement also defines how that interest will be purchased and by whom. Such an agreement creates a market for your business interest by facilitating a smooth transfer of ownership. Life Insurance One of the best alternatives for funding a Cross Purchase strategy is life insurance.
Life insurance can provide financing to buy out a partner's interests exactly when needed.
Cash values of a life insurance policy are similarly available in the event of a lifetime buy-out. Life insurance is easy to administer and the proceeds are usually received income tax free. Life insurance will also strengthen a business credit position while providing funding that uses discounted dollars, allowing the buyers to purchase the business for pennies on the dollar. Another alternative for funding a Cross Purchase strategy is a Disability Buy-Out Coverage policy. When one of the owners of a business is totally disabled, the policy can be used to determine the value of the disabled owner's share and when the buy-out will be executed.