Business Will
If you are a part-owner of a privately held business, you need a buy-sell agreement. Such an agreement is a will for the business. It is not sensible to neglect having a will, and avoiding suitable arrangements for your business is equally negligent.
A buy-sell agreement not only protects your family for the value of your business interests, but also protects the surviving owners because the transfer of the disabled or deceased partner’s ownership will be easier since a method of transfer, payment and terms is established. This reduces or eliminates any unpleasant negotiations between the deceased or disabled owner’s family and the surviving owners.
These agreements have various names depending upon the nature of the entity, and can be referred to as shareholders’ agreements, buy-sell agreements, members’ agreements or partnership agreements. Whatever their name, they serve the same purpose—to say what happens to ownership shares following a disability or death. The agreements can be with the entity or separately with the other owners. Taxes and sources of cash for the payments would be a consideration to determine the format of the agreement. Your financial advisor can help you work out the best format for your business.
These agreements can also provide for transfers upon retirement, a desire to leave the business for any other reason, personal bankruptcy, loss of professional license or suspension of practice, conviction of a crime and restrictions of transfer to outsiders. If anyone reading this blog wants a checklist of what should be in a buy-sell agreement, you can email me at [email protected].
If you do not have an agreement, I suggest you consider preparing one forthwith. You owe it to yourself, your family and your partners. If you have an agreement, good for you, but try to review it at least once every two years for current applicability and values.
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