Page 64 - A Canuck's Guide to Financial Literacy 2020
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shareholders in addition to domestic, it's recommended to create two share classes so
capital dividends can be paid to domestic shareholders only.
Buy-Sell Insurance
A buy-sell agreement is an agreement between business partners to ensure the longevity of
their company. A buy-sell agreement comes into conversation when a business partner
passes away. The business owners would enter into an agreement that the surviving owner
will purchase the business interest of the deceased owner. Each business owner would
purchase a life insurance policy on the other owner and would name themselves as a
beneficiary. Upon death, the insurance would company would provide a death benefit in
which the proceeds could be used to redeem the shares of the company from the
deceased's holder's estate. To avoid future confusion, the buy-out sell agreement should be
documented in the shareholder's agreement.
Key Person Insurance
Key Person insurance is insurance purchased by the business on the life of a person whose
expertise and knowledge are vital to the company's survival. The beneficiary of such a
