Buy-Sell Agreement Imi

If you`re a business owner, it`s important to have a plan in place for what happens to your business if you or one of your business partners passes away or becomes incapacitated. One tool that many business owners use for this purpose is a buy-sell agreement. In this article, we`ll look specifically at an agreement commonly known as the IMI (insurance, mutual funds, and installment note) buy-sell agreement.

What is an IMI buy-sell agreement?

An IMI buy-sell agreement is a type of buy-sell agreement that involves the use of life insurance, mutual funds, and installment notes to fund the transfer of business ownership. In this type of agreement, each business partner purchases a life insurance policy on the other partners, with the business as the beneficiary. If one partner dies, the life insurance proceeds are used to buy out the deceased partner`s share of the business.

In addition to life insurance, the partners also invest in mutual funds, with the goal of building up a cash reserve that can be used to buy out a partner`s share of the business in the event of disability or retirement. Finally, an installment note is used to finance the purchase of the departing partner`s share of the business.

Why use an IMI buy-sell agreement?

One of the primary benefits of an IMI buy-sell agreement is that it provides a predetermined and agreed-upon method for valuing the business and transferring ownership. This can help to prevent disputes between partners and their heirs in the event of a partner`s death or incapacity.

In addition, using life insurance to fund the buyout can help to provide liquidity when it`s needed most. Without life insurance, the surviving partners may have to come up with the funds to buy out the deceased partner`s share of the business, which can be difficult or impossible if the business is struggling or if the partners have limited personal resources.

Finally, an IMI buy-sell agreement can help to provide a stable transition for the business in the event of a partner`s departure. The installment note provides a structure for financing the buyout over time, which can help to ensure that the business can continue to operate without disruption.

Conclusion

An IMI buy-sell agreement is a valuable tool for business owners who want to ensure that their businesses continue to thrive even in the event of the unexpected. By providing a predetermined method for valuing the business and transferring ownership, and by using life insurance, mutual funds, and installment notes to fund the buyout, an IMI buy-sell agreement can help to provide stability, continuity, and peace of mind for business partners and their heirs.