Chapter 11 - Buy-Sell Agreements
provisions that must be in a buy-sell agreement
- parties involved - purpose - commitments - business interest description - transfer restrictions during lifetime - purchase price - funding
types of corporate buy-sell agreeements
1) entity (stock-redemption) purchase agreement 2) corporate cross-purchase agreement
types of partnership buy-sell agreements
1) entity-purchase agreement 2) cross-purchase agreement
ways to value buy-sell agreement
1) fixed price 2) apply formula 3) appraisal 4) combination of appraisal and formula
Buy-Sell Agreement
A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled - avoids probate - creates a mechanism for valuing business interest
cross purchase agreement (insurance formula)
N * (N-1) = total # of life insurance contracts needed N = # of partners
entity purchase (liquidation) agreement
a business buy-sell agreement for partnerships and corporations in which the business purchases the decedent's interest
cross-purchase agreement
a business buy-sell agreement for partnerships and corporations in which the surviving co-owners will be the purchasers of the business interest of a deceased owner
stock-redemption agreement
corporation purchases decedent's stock at death
business continuation agreement
used when the primary purpose is to maintain the business after the decedent's death