4 Benefits of Buy-Sell / Business Continuation Planning
- Guarantee a Buyer – A Buy-Sell agreement benefits the selling partner’s family by providing a guaranteed buyer. And, the remaining partners are protected against the sale of a partner’s interest to an outsider.
- Create Liquidity – Upon a triggering event (death, disability, retirement, etc.) the business partner’s family has a need for cash to pay tax liability and other expenses. A quick sale of the partner’s business interest can often result in the family receiving less than fair market value. A well documented, and adequately funded, buy-sell arrangement provides the liquidity the partner’s family will need.
- Fair Selling Price – The Buy-Sell Continuation Agreement will state how the business is valued now and in the future. This helps determine the amount of funding required to fulfill the agreement. This also reduces the risk of costly valuation disputes among partners and families.
- Harmony – “Meet your new partner, the spouse.” Business partnerships are often formed between friends. Maintaining harmony can become a challenge difficult after your partner’s family takes his or her spot in the business. A Buy-Sell / Business Continuation Arrangement protects the owners and the business from challenges that arise when your deceased partner’s family joins the business.
In this video, an Orlando based attorney discusses the importance of planning for the departure of a business partner:
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Disclaimer: I do not provide tax, legal or accounting advice. I recommend qualified attorneys, accounting and funding professionals to assist in the formation, valuation and funding of your buy-sell / business continuation arrangement.