Why a Buy/Sell Agreement Matters

Why a Buy/Sell Agreement Matters

What’s Closely-Held Business?

The majority of businesses created in the United States every year are small business. Businesses consisting of 500 or fewer employees are generally closely-held. The term closely-held means a business entity’s shares are held by a small number of stockholders. Stockholders typically have a common interest in the company and the shares of stock are generally not traded in the public stock market.  Closely-held businesses can take any form, LLC, Partnerships, or C-Corporation. Determining the value of a closely held corporation is often a challenge.

Major Concerns of Closely-Held Small Business

Perhaps the greatest issues facing Closely-held businesses concerns succession and the need for a buy/sell agreement.  Buy / sell agreements are used by sole proprietorships, partnerships and closely held corporations to smooth transitions of ownership when a partner dies, retires, or exits the business.  The two most common types of buy/sell agreements are:

  • In a cross-purchase agreement, the remaining owners purchase the shares of the business at a predetermined price.
  • In a redemption agreement, the business entity buys the share of the business.

Buy/Sell agreement can be funded with life insurance. The agreement requires the business shares be sold to the company or the remaining members of the business according to a predetermined formula. This is not the only way a Buy/Sell Agreement is created and these agreements are tailored to the business owner’s and their needs. The use of Life Insurance is the most common method.

Act Now!

Taking the time to plan today can save both you and your company a tremendous amount of uncertainty down the road.  Death, divorce, and retirement are triggering events that will certainly occur in most businesses.  Having a plan in place is essential to the long-term survival of any business.  Schedule a review today!

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The Time to Act is Now!

April 24, 2020

The Time to Act is Now!

The time to act is now. We hope this post finds you and your family staying home and staying safe.  It’s amazing how fast times can change in such a short period of time. Thousands of Americans have tragically loss their lives in just the past few months from Covid-19 virus. Michigan is one of the hardest hit states in the country. The nation is being tested and there is no end in sight.

50%of Americans are Unprepared

Times like this that remind us of the need to prepare for what will eventually happen to all of us, death and taxes.    A recent study conducted by Merrill Lynch found nearly half of all American’s over the age of 55 still do not have a Will.  To make matters worse, only 18 percent of people in that age range have all of the recommended legacy plan essentials: a will, a health care directive, and durable power of attorney.

Often times when the topic of estate planning comes up people often think that they cannot afford an estate plan or that a Will is more than enough to satisfy their needs.  However, two of the most essential pieces to a complete estate plan are a health care directive and durable power of attorney.  A Power of Attorney is essential if you become ill and unable to make medical and financial decisions. 

Cain Taylor Coleman Morson and Associates provides a full range of estate planning services. Our services include Wills, Trust, Powers of Attorney for Health, and Durable Powers of Attorney.  Documents do not complete an effective estate plan.  Advice and experience does.  Contact us for your free consultation.

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