{"id":78,"date":"2017-05-27T19:48:20","date_gmt":"2017-05-27T19:48:20","guid":{"rendered":"https:\/\/www.saudercpa.com\/blog\/?p=78"},"modified":"2017-05-27T20:03:53","modified_gmt":"2017-05-27T20:03:53","slug":"why-you-need-a-buysell-agreement-for-your-business","status":"publish","type":"post","link":"https:\/\/www.saudercpa.com\/blog\/2017\/05\/27\/why-you-need-a-buysell-agreement-for-your-business\/","title":{"rendered":"Why You Need a Buy\/Sell Agreement for Your Business"},"content":{"rendered":"

Preface: The cost of a buy\/sell agreement is\u00a0miniscule\u00a0compared to preventing the turmoil that can result among family members or\u00a0owners when capital or equity interests are traded. Buy\/sell agreements, plain and simple, make sense no matter your business. If you have a corporation, LLC or partnership – any business with more than one equity holder – you need a buy\/sell agreement.<\/em><\/p>\n

Why You Need a Buy\/Sell Agreement for Your Business<\/strong><\/p>\n

Any business that has more than one equity holder needs a buy\/sell agreement. A buy\/sell agreement is a written contract that specifies the steps that will be taken if an equity holder wants to release his ownership.\u00a0 The documented rules in a buy\/sell agreement determine how values will be appraised and payment made during fragile business conditions. In addition, a buy\/sell agreement can prevent other partners from selling to other individuals or competitors, such as anyone joint equity holders do not want to hold equity. Buy\/sell agreements specify rules for a business entity or other owners to acquire another equity interests in specific in the event of an owner selling for retirement, death, disagreements, defaults, or incapacitation.\u00a0 So you could say a buy\/sell agreement is a \u201cbusiness will,\u201d and prevents unfair treatment of all equity holders in delicate situations arising from the trade of of a business interest.<\/p>\n

A buy\/sell agreement is typically a legal document prepared with attorney oversight. The document contains a prearranged agreement for a sale of business interests. The agreement is not limited to 1) who can purchase a departing partner\u2019s or shareholder\u2019s equity interests, 2) the methodology or hybrid appraisal\u00a0for determining value, or 3) events that will spark a buy\/sell agreement.<\/p>\n

In a corporation, a buy\/sell may result in treasury shares, and necessitate terms for the trade value between the shareholder and the corporation. The cost of a buy\/sell agreement is low compared to preventing the turmoil that can result among family members or\u00a0owners when capital or equity interests are sold. Buy\/sell agreements, plain and simple, make sense no matter your business. If you have a corporation, LLC or partnership, any business with more than one equity holder, you need a buy\/sell agreement.<\/p>\n

What do you need to know to talk your attorney and hold an intelligent conversation? First, you can have a redemption buy\/sell agreement where your interest is traded\u00a0to the business, so the other owners don\u2019t need to pay out of their own checking account. Or, you can have a cross-purchase agreement where another equity holder has first right to purchase your interest. A cross-purchase agreement allows partners or shareholders to acquire your interest, or you to buy other equity interests.<\/p>\n

Second, and more important, the nucleus of a buy\/sell agreement ensures proper valuation of a business when there is an unanticipated pending sale of an interest. Valuation is key to a fair market sales price of an interest. Valuation of your business should occur every several years with a buy\/sell agreement to ensure you have a documented benchmark history of the business value from say the basement to the peak.<\/p>\n

At a minimum, you should value your business at the writing of a buy\/sell agreement, as well as every time the buy\/sell is updated. Your buy\/sell should also should list specifically the method(s) the appraiser will use to calculate the business value in the marketplace, e.g. the income approach or say\u00a0a market approach. Typically the\u00a0most successful\u00a0buy\/sell valuations carefully\u00a0avoid\u00a0unnecessary hybrids, e.g.\u00a0complex combinations\u00a0of income, asset or market approaches.<\/p>\n

In summary, A buy\/sell agreement is a written document prepared\u00a0with attorney oversight, that details the requirements and play rules\u00a0for\u00a0trades of a business interest in\u00a0instances of ownership change. If you own a business interest with partners or shareholders, you need a buy\/sell agreement. If you already have a buy\/sell agreement, make sure it is updated when necessary. If you do not yet have a buy\/sell agreement for your business, talk to your trusted advisor or CPA about obtaining one today.<\/p>\n

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Preface: The cost of a buy\/sell agreement is\u00a0miniscule\u00a0compared to preventing the turmoil that can result among family members or\u00a0owners when capital or equity interests are traded. Buy\/sell agreements, plain and simple, make sense no matter your business. If you have a corporation, LLC or partnership – any business with more than one equity holder – … Continue reading “Why You Need a Buy\/Sell Agreement for Your Business”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts\/78"}],"collection":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/comments?post=78"}],"version-history":[{"count":6,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts\/78\/revisions"}],"predecessor-version":[{"id":84,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts\/78\/revisions\/84"}],"wp:attachment":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/media?parent=78"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/categories?post=78"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/tags?post=78"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}