You want to sell your share of a business? How much should you receive? This is one of main areas of contests in small business arena. It’s almost as bad as dieing without any papers! You form a business entity with someone, everything is going well, and now one of you wants to or has to sell your share of the business. This typically occurs in cases of: desire to sell one’s interest, death, disability, retirement, personal bankruptcy, termination, incompetence, divorce, etc. This would be easy to answer had you executed a buy-sell agreement at the same time you entered the business arrangement! However, you’re usually too busy or short of funds at that time and just hope for the best!!!
A buy-sell agreement controls the circumstances under which an owner may sell his or her interest, who is a permitted buyer, and how will the price to be paid be determined. A buy-sell agreement benefits the business entity and its owners by:
- Allowing the remaining owners to determine with whom they will work and share control of the entity;
- Preventing outsiders or heirs, whose interests may conflict with those of the remaining owners, from obtaining ownership interest;
- Ensuring continuity of management and control by the remaining owners;
- Increasing job stability for minority interest owners and key non-owner employees;
- Providing for the orderly liquidation of the owner’s interests in the event of death, disability, retirement, or other voluntary or forced withdrawal;
- Preventing continuing involvement in the business of retired or inactive owners;
- Creating a market for the shares of deceased, retiring, or withdrawing owners;
- Generating cash to pay death taxes and estate settlement costs;
- Fixing the value of the selling owner’s interest, including a minority discount, for estate and gift tax purposes; and
- Preventing the loss of an S corporation election be preventing a transfer of the interest to an unqualified shareholder (e.g., a corporation) or to a shareholder who refuses to elect S corporation status.
Caution: Estate plans of individual owners must be carefully reviewed to assure that there is no conflict with the buy-sell agreement….otherwise law suits will follow. In many cases more than one attorney may need to be involved in order to avoid conflicts of interest between the parties.
|Areas of Practice:
Commercial Law & Contracts
Mergers & Acquisitions
Science, Computers, & Tech
|We take pride in providing personalized legal services for your individual or business needs. Our practice includes: business start up and funding, business buying and selling, business succession planning, business reorganization, lawsuit protection and debt settlement or consolidation. We are also intellectual property attorneys with experience in electrical, software, mechanical and biotech technologies.