Buy-Sell Agreements

Written By: Larry Miller, Jr. | August 15, 2017 | No Comments

What Are Buy-Sell Agreements?

Buy-Sell Agreements require one party to purchase a specific ownership interest in the company and the other party to sell an ownership interest. Buy-Sell Agreements protect businesses from

• divorce;
• death;
• disability; and
• other possible issues.

Two Type of Buy-Sell Agreements

There are different types of Buy-Sell Agreements. It’s important to understand which one may be right for you:

Cross-Purchase Agreements

• With these agreements, each stockholder in a corporation is required to own life insurance for the lives of other stockholders.
• Each owner would be the beneficiary and would pay the premiums.
• If one of the owners passes away, the proceeds from the insurance would be used to buy the ownership interests from the estate of the owner who has passed away.

Cross-Purchase Agreements can become complicated if there are more than two owners. Instead, 0wners can create a Trust Deed agreement.

The Trust

• owns one policy for all stockholders; and
• represents the other owners to ensure proceeds from insurance money are distributed equally in the event of a death.

Entity-Purchase Agreements

If a specific event occurs, the business buys an owner’s entire interest at a decided price.

• In the case of a partnership, it will be in the form of liquidation of interest.
• If your business is a corporation, this agreement will result in a stock redemption agreement.

Variations in Buy-Sell Agreements

There are many differences possible within these two classifications of Buy-Sell Agreements depending on whether your business is a

• partnership;
• corporation; or
• other entity.

Consulting With Our Buy-Sell Agreements Experts is Crucial

Buy-Sell Agreements can affect your tax obligations. Certain types of agreements may be more appropriate for your business structure. Buy-Sell Agreements can impact your Estate Planning. Our Business Attorneys have 40+ years of experience drafting Contracts including Buy-Sell Agreements in Berks County around Reading and throughout Pennsylvania. We have the full breadth of legal expertise you need to ensure your Buy-Sell Agreement is optimal for your business. Contact Us Online or Call Us at 610-670-9000 today.

Miller Law Group’s Berks County Law Offices are in West Lawn near Reading, PA.