What are the basic facts about why life insurance may be used by business owners?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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For sole proprietorships, partnerships and closely held corporations the death of a general partner can result in dissolution of the firm. If this occurs, the surviving partners and the estate of the deceased may need to reach agreement about the disposition of the business.

This can result in forced sale, liquidation of assets, and depletion of value. Buying out the interests of the deceased partner and continuing the business may not be easy to arrange at such a time and the financing may not be available.

The solution is to have a previously arranged buy and sell agreement.

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