5 Reasons Business Owners Need to Review Their Buy-Sell Agreements Immediately

Savvy business owners typically execute buy-sell agreements in order to protect their family’s biggest asset.  It is, essentially, the last will and testament for your business.  But just like a will, if circumstances change, a buy-sell agreement needs to be updated to reflect those changes.  Here are five good reasons you need to meet with a Creative Business Lawyer to review your company’s buy-sell agreement right away:

Changes in business value.  Many buy-sell agreements attach a specific value to the business, but that value can – and does – change with the times.  A valuation that is now too high can be as bad as one that is too low, resulting in existing shareholders having to pay an inflated sum to a partner that is leaving the company.

Under-valuation triggering higher taxes.  If the valuation is based on a standard that would conflict with the IRS’ application of highest-and-best-use valuation, you could be sitting on a tax bomb.

Marital issues.  A divorce can wreak havoc on a privately held business, and if marital issues have not been taken into account in your business’ buy-sell agreement, you are asking for trouble.

Life changes.  A good buy-sell agreement should take major life changes of its partners into consideration: death, divorce, disability, departure and dissolution.  The agreement needs to cover contingencies for all these triggers.

Lack of funding.  A buy-sell agreement is an empty shell unless it is properly funded and that funding matches up with the terms within the agreement.

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The Parents Estate Planning Law Firm, PC

At The Parents Estate Planning Law Firm, we answer your questions at your convenience; we stay in frequent communication; and we meet to discuss changes in life circumstances and in the law to ensure that your assets are protected.

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