In the following guest blog post, Welts, White & Fontaine, P.C.’s Thomas “Jay” Leonard, Esquire, explains the importance of Buy-Sell agreements for business owners:
Own A Business?
If you are a business owner, you should know about Buy-Sell Agreements. Things happen and circumstances change. In a business, it is important to manage changes in an orderly way. A Buy-Sell agreement is one of the agreements among owners which will help smooth the bumps.
Benefit of a Buy-Sell Agreement
In a Buy-Sell agreement the shareholders/partners decide how to address events such as death, divorce, bankruptcy and other unexpected happenings. It may also address changes in the personal circumstances of the owners such as health issues or disability. The purpose of the agreement is to plan for these events and to avoid problems like becoming a partner with your present partners’ heirs, or even worse, dealing with your partners’ divorced spouse. It may also address matters of retirement or even just the possibility that one owner may want to “sell out”.
Many Buy-Sell agreements start with a base value of the business and call for the buying and selling of an individual’s business interest based upon the particular triggering event. While the value of the business is key, buy out values may vary with circumstances. For example, for events such as death, the partners may want to have an agreement which is funded by life insurance and based upon the full value of the business as a going concern. For matters such as divorce and bankruptcy, it may be more appropriate to indicate a value based upon liquidation of the assets with discounts for minority interests. For retirement, because it is not funded by insurance, a payment schedule may be important. The important idea here is that a Buy-Sell agreement can address the specific details. When there is no agreement, managing the details is left to chance.
Insurance May Be Part of The Solution
In times of sudden changes, businesses are subject to additional stresses. When owners are involved, there are management problems and there are financial problems. A good succession plan will address management issues. In cases of death and disability, insurance policies on shareholders/partners can assist with financial needs for the business and the owner’s family. While insurance is not the complete solution, it may be an important component by providing funding under a Buy-Sell agreement. A Buy-Sell agreement affords owners peace of mind and will save businesses time and money, in the long run.
Welts, White & Fontaine, P.C. can assist you with these agreements. Our experienced attorneys are available to assist you. If you are interested in learning more about these agreements or have other questions, please contact Thomas “Jay” Leonard, Esq. at 603-883-0797 for a free 30 minute initial consultation. Please visit our web site at www.lawyersnh.com for more information.