A buy-sell agreement protects each owner's interest, preserves value, and prevents later disputes when an event of transfer occurs. A transition event could be a voluntary departure, disability, retirement or death. Examples of such events include the following:- One of several owners is in a skiing accident, rendering the person incapable of working.
- A disgruntled owner sells his interest to a stranger. The executor of a deceased owner wants to sell, but the company lacks funds to purchase the deceased owner's share.
- One of the owners gets divorced
- Without a buy-sell agreement to address these issues and assure orderly transition, the resulting chaos could be financially devastating for any business owner.
Critical Note: How do you value your business? Once a value is established, how do you fund a buy-sell agreement? Business valuation is one of the most problematic issues surrounding the buy-sell agreement. There are several business valuation methods and it is important that an appropriate method be implemented. As pertains to funding, if a cash or financial sale is not feasible, a sale funded by life insurance may best address the funding of a buy-sell agreement.
Estate Planning Law Office of
Yvette E. Taylor-Hachoose
1234 River Road
Washington Crossing, PA 18977
www.ythlaw.com
215-321-4033
Posted on Wed, Jul 23, 2008
Yardley News
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