"As much as you might love running your business, you must have an end-goal in the plan. At the very least, an exit strategy keeps you from turning your business into a glorified job – working from home, but with longer hours” |
- Kevin Donaldson |
Business Succession PlanningUnleash the power of business continuity
by making the right choices today. |
What Is a Buy and Sell Agreement?
A buy and sell agreement is a legally binding contract that stipulates how a partner's share of a business may be reassigned if that partner dies or otherwise leaves the business. Most often, the buy and sell agreement stipulates that the available share be sold to the remaining partners or to the partnership.
The buy and sell agreement is also known as a buy-sell agreement, a buyout agreement, a business will, or a business prenup.
The buy sell agreement is a component of a Business Succession Plan.
Read more at Strategies for Buy-Sell Agreements using insurance.
The buy and sell agreement is also known as a buy-sell agreement, a buyout agreement, a business will, or a business prenup.
The buy sell agreement is a component of a Business Succession Plan.
Read more at Strategies for Buy-Sell Agreements using insurance.
How a Buy and Sell Agreement Works
Buy and sell agreements are commonly used by sole proprietorships, partnerships, and closed corporations as part of their Business Succession Planning process in an attempt to smooth transitions in ownership when each partner dies, retires, or decides to exit the business.
The buy and sell agreement requires that the business share be sold to the company or the remaining members of the business according to a predetermined formula.
In the case of the death of a partner, the estate must agree to sell.
The buy and sell agreement requires that the business share be sold to the company or the remaining members of the business according to a predetermined formula.
In the case of the death of a partner, the estate must agree to sell.
Understanding Buy and Sell Agreements
There are two common forms of agreements:
When a sole proprietor dies, a key employee may be designated as the buyer or successor. Small business succession planning is critical to a conflict free transition of ownership and ensuring their is capital to pay for it is critical to a successful succession planning outcome. We provide business succession planning in Denver and nationally.
Learn more about using life insurance to fund your buy sell.
- In a cross-purchase agreement, the remaining owners purchase the share of the business that is for sale.
- In a redemption agreement, the business entity buys the share of the business.
When a sole proprietor dies, a key employee may be designated as the buyer or successor. Small business succession planning is critical to a conflict free transition of ownership and ensuring their is capital to pay for it is critical to a successful succession planning outcome. We provide business succession planning in Denver and nationally.
Learn more about using life insurance to fund your buy sell.
Key Considerations in Buy and Sell Agreements
- Buy-sell agreements are designed to help partners manage potentially difficult situations in ways that protect the business and their own personal and family interests. For example, the agreement can restrict owners from selling their interests to outside investors without approval from the remaining owners. Similar protection can be provided in the event of a partner's death.
- A typical agreement might stipulate that a deceased partner's interest be sold back to the business or remaining owners. This prevents the estate from selling the interest to an outsider.
- In addition to controlling ownership of the business, buy-sell agreements spell out the means to be used in assessing the value of a partner's share. This can have uses outside the question of buying and selling shares. For example, if there is a dispute among owners about the value of the company or of a partner's interest, the valuation methods included in the buy and sell agreement would be used.
What We Do To For You
We design your buy and sell agreement
to stipulate how a partner's share of a business may be transferred in the event of the partner's death, disability, voluntary departure or involuntary departure. We insert the necessary structures in your cooperate formalities to provide continued leadership. We establish a methodology for annually determining your business' value. We build the funding tools necessary to provide liquidity for the buy sell. We identify and mitigate your potential legal risk and tax exposure. |