A comprehensive business succession plan should address both the management and ownership of the business. One common feature of a succession plan is a Buy/Sell agreement between owners of a business by which the surviving owners agree to purchase the interest of a withdrawing or deceased owner. Some business succession plans may also include a redemption arrangement between owners of a business and the entity itself by which the entity agrees to purchase the interest of a withdrawing or deceased owner.
There are a multitude of purposes and uses for Buy/Sell Agreements, including:
(i) imposing restrictions on the transfer of individual interests in a business entity to:
(A) maintain a balance of control
(B) prevent participation by third parties who may not be acceptable to incumbent owners
(ii) to serve as an estate planning tool
(iii) to hedge against internal discord amongst the owners which might otherwise cause irreparable damage to the business or its operations
Of course, additional purposes and uses may be identified, but the above are typical reasons for a Buy/Sell Agreement.
Call 574.232.3538 to speak to an attorney about how Buy/Sell Agreements can affect company operation and management, protect company assets and help provide continuity for your business.
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