Alright, alright, alright,…..(are you getting the Matthew McConaughey vibe…lol) gather ‘round the braai! You’ve probably heard some wild tales about buy-and-sell policies—the life insurance trick that saves your SME if a partner croaks. Our last yarn, Does Your SA Business Have a Will?, laid out how these policies keep your biz tight, tax-free, and drama-free. But, like a dodgy uncle at a family reunion, some myths about buy-and-sell policies are floating around, spreading more confusion than a load-shedding schedule. Let’s debunk three fugazi fables with a laugh, so you can plan smart and keep your business vibing.
Myth 1: “It’s a Magic Money Tree!”
The Fugazi: Braam from Benoni thinks a buy-and-sell policy is like hitting the Lotto. “If my partner dies, I get a fat cheque to buy a bakkie and braai for days!” Nope, this ain’t Who Wants to Be a Millionaire.
The Truth: The policy pays out to buy the deceased’s shares, not to fund your midlife crisis. For example, if your partner’s 50% stake in your R6 million biz is worth R3 million, the R3 million payout goes to their shares, not your new sound system. SARS watches like a hawk, and if you misuse the cash, you’ll lose the estate duty exemption (20–25% tax).
The Chuckle: Braam tried using the payout for a 4×4, only to get a SARS audit and a bill bigger than his braai tab. Stick to the script, bru!
Myth 2: “It’s Just a Fancy Will, No Biggie!”
The Fugazi: Sipho in Soweto heard buy-and-sell policies are a “business will” and thought, “Cool, I’ll just scribble it on a napkin and call it a day.” Wrong move, my guy—this isn’t a pub quiz answer sheet.
The Truth: A buy-and-sell policy is like a business will, but it needs a proper agreement drafted by an attorney, not your mate’s cousin who “knows law.” The agreement spells out share valuation, payout terms, and timelines. Without it, SARS could slap you with estate duty, and your partner’s shares might end up with their TikTok-famous niece.
The Chuckle: Sipho’s napkin “will” got him a court date with his partner’s family, who now own half his spaza shop. Get a pro from www.ffreedom.co.za to do it right!
Myth 3: “One Policy Fits All, Forever!”
The Fugazi: Thandi in Durban set up a buy-and-sell policy in 2015 and thinks she’s sorted for life. “My biz hasn’t changed, so why bother updating?” Oh, Thandi, it’s not a set-it-and-forget-it air fryer!
The Truth: Your business’s value grows (or shrinks), and so do your policy needs. If your SME’s now worth R10 million but your policy’s still at R2 million, you’re short R3 million to buy shares. Plus, new partners or exits need fresh agreements. Review every 2 years or risk a tax mess and ownership drama.
The Chuckle: Thandi’s outdated policy left her begging for a bank loan to cover shares, while her new partner’s dog (yep, an “heir”) nearly got voting rights. Update, don’t snooze!
Why This Matters
These myths are as fake as a R200 Rolex from a Joburg pavement. A buy-and-sell policy is your SME’s shield, dodging estate duty and keeping control, but only if you dodge the fugazi. In South Africa, where 30% unemployment
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