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
- 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:
- 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.
- 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.
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
- 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’ 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.
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