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Business Succession Planning
Get it in Writing - the Buy-Sell Agreement
In the event of the passing of a business partner, absent a written agreement, competing interests of the business and the family members can lead to major conflicts, litigation and even forced liquidation of the business.
Buy-sell agreements are a simple, effective way for business owners of privately held companies to plan for the orderly transfer of business interests where two or more owners are actively involved in the business. With a buy-sell agreement in place, the stability of the business for its clients, employees and investors (or creditors) is assured.
Types of Business Owner Buy-Sell Arrangements
Entity Plan
Under this arrangement, used when there are multiple owners, each of the business owners has a separate agreement with the corporation or partnership as the entity. The entity, per the buy-sell agreement, will buy the deceased partner’s interest at his or her death.
Cross Purchase Agreement
Used in situations where there are two or three owners, a cross purchase agreement is established between each of the owners. At the death of one of the owners, the surviving owners agree to buy a proportionate share of the deceased owner’s interest.