Stock Redemption Basics

Many benefits and challenges follow running a business, especially with finances. For businesses that find themselves in a financial rut, a stock redemption plan may provide owners more control over business finances and protection against future monetary struggles. 

Stock-Redemption Defined 

Stock-redemption consists of a binding agreement between the owners of a corporation to control an appropriate transition of business interest between parties. Usually, stock redemption agreements come into play when a business owner passes away, retires, or experiences a disabling accident. Simply put, stock redemption agreements allow company stakeholders to purchase life insurance coverage for any legitimate business interest in the case of an unexpected event that can impact shares.

Financial Security and Stock Redemption 

One of the most important benefits of stock redemption agreements is financial security and planning, especially if something happens to a business owner that prevents them from operating their business. A stock redemption agreement will provide tax-free financial resources on behalf of the company to offer to the former owner and family. 

Deciding Coverage Amount 

Wise business owners make educated decisions on matters influencing business funds. As such, you may want to consult with an evaluation expert before committing to a stock redemption agreement. An expert will advise you on the best coverage plan for your needs.