Then in the event of your partner's death or disability, you would purchase your partner's portion of the business at a price determined by your
buy-sell agreement. You would make this purchase with a lump-sum payment from one of your insurance policies.
A
buy-sell agreement should include provisions voiding any attempted transfer of equity that would invalidate the S-corporation election.
In order to avoid internal conflict and a smooth transition in situations where one or all owners desire to leave the business, a good
buy-sell agreement may have any of the following additional provisions:
In choosing your
buy-sell agreement's initial language, consider the tax implications.
* The parties ensure that the
buy-sell agreement includes language defining "critical illness" in the same way as the critical illness policies.
If a key employee from outside the family will likely take over, the business may consider funding the buyout plan with an endorsement split-dollar
buy-sell agreement. (Source: Crump Life Insurance Services)
Further, has the franchisor pre-approved ownership following the operation of your
buy-sell agreement?
Betti offers the example of an insured
buy-sell agreement. Consider a business with four owners and one dies.
At these meetings, you can update bylaws, cover
buy-sell agreements, and generally take care of business.
4)
Buy-Sell Agreement: If you own your business with others, you need a
buy-sell agreement.
One of the advisers on the team, Andrew Karlen of the law firm Karlen & Stolzar in White Plains, New York, says that a family business with co-owners generally should have a
buy-sell agreement in place.
Parrish: Businesses have a lot going on at any one time, and a
buy-sell agreement has implications beyond just good governance.