At our most recent Thursday Insights educational event (June 6, 2013) attorney Alex Matuk, Esq. and certified financial advisor Greg Banner shared their insights into the world of the Buy-Sell Agreements. In a lively discussion with the folks who attended, Alex was candid in mentioning that this is one of the most important contracts a business owner must have in place.
In case you missed it, here are highlights from their presentation:
What is a Buy-Sell?
Legal binding written contract placing specific restrictions on the transfer of stock and requires predetermined actions upon the occurrence of designated triggering events.
Why a Buy-Sell?
To control your business and its ultimate transition, whether triggered by voluntary or involuntary events.
What does a Buy-Sell planning process look like?
- Understand the need
- Select a plan type
- Value the business
- Implement the plan
Understanding the Need
Triggering Events- Death
- Disability
- Divorce
- Early exit (moving on, bankruptcy)
- Retirement
- Family business is forced to liquidate upon death or disability of the business owner
- Fair market value may be significantly reduced
- Goodwill is lost
- Family control is lost
- Income and / or benefits are lost
- Business
- Surviving shareholders
- Employees
- Family of Deceased
- Creates an immediate market for a business interest
- Protects against unwanted owners
- Available funds to provide for family and heirs
- Preserves, promotes and protects business valuation
- Specific definitions in formula of triggering events
- Helps reduce risks of disputes with Internal Revenue Service
- When do you or your partner plan to retire?
- What do you want to happen in the case of death or disability?
- What happens to the company and revenues if you died?
- Who should own your business interest if you died?
- Who else could run the company?
- How do you value the business?
- How would vendors / creditors react to you death?
- Would the successors be able to provide for your family?
For a more thorough look at the FULL DIGITAL PROGRAM to this Thursday Insight program, click on the link below to be directed to the information regarding this program.