After you have a valuable financial interest in your company, you may want to think about various exit strategies. A funded buy-sell agreement with your co-owner or partners can provide security to you, your partners and your family. A buy-sell agreement is a legal contract that is common in closely held businesses. It is an agreement you can enter into now that provides for the future sale of your business interest. When carefully drafted, your buy-sell agreement may be used to set the taxable value of your business interest.
The buy-sell agreement provides a measure of security for both parties of the sale. The buyer is bound by contract to buy your interest, and the buyer knows that you are not allowed to sell to another party. In addition, the buy-sell agreement identifies the conditions under which a sale will occur. You can choose the events that will trigger the sale of your interest under the agreement. Typical trigger events include death, long-term disability, retirement, and divorce.READ MORE