A buy and sell agreement is a unique legally binding agreement used to reallocate/sell shares upon business owner’s death, disability, termination of employment, license revocation, divorce, retirement, or general sale of interest or share of a business in the event an owner dies or sells his/her share of the business. Buy/sell agreements are used by sole proprietorships, partnerships, closed corporations, etc. to value the business share or interest of a proprietor, partner or shareholder. Each buy-sell agreement needs to be handcrafted to appraise the unique needs of each business. There is no one-size fits all buy-sell agreement.
Buy- Sell Agreements are used in many different scenarios, including:
- You want to establish a fair value of a share of a business in case a dispute erupts between owners. For example, one person wants to exit and the other wants to remain and buy out the partner who is exiting.
- You are a co-owner of a business and want to restrict other owners from selling their interests to another person or entity. In the event of death of an owner, the valuations used in the buy sell agreement may be the estate value for IRS purposes.
- An attorney should draft the buy sell agreement. In fact each of the owners should have their own attorney involved in the process.
A tax attorney should review the agreement to consider tax consequences and benefits of certain structures. Here at the Law Offices of Howard L. Schwartz we are business lawyers and tax lawyers who can look at the agreement from all angles to determine if a current agreement is right for you and can assist in preparation of the right agreement for your unique circumstances.