Article Date:
August 2017


Word Count:
2191

 

 

Buying a Business with Co-Owners? You Need a Buy-Sell Agreement!


If you are buying a business with one or more co-owners, please take our advice and set up a buy-sell agreement. A well-drafted agreement can do these valuable things for you:

 

1.

Transform your business ownership interest into a more liquid asset

2.

Prevent unwanted ownership changes

3.

Save taxes and avoid hassles with the IRS

 

Read this article to find out how buy-sell agreements work and the important details to understand. Then huddle with your co-owners, attorney, and tax pro to hash out a buy-sell agreement that suits your situation.

 

Buy-Sell Agreement Basics

 

Buy-sell agreements come in two basic flavors:

 

·

Cross-purchase agreements

·

Redemption agreements (sometimes called liquidation agreements)

 

When you enter into a cross-purchase agreement, it’s a contract between you and the other co-owners. Under the agreement, a withdrawing co-owner’s ownership interest must be purchased by the remaining co-owners when a triggering event occurs, such as death or disability.

 

When you enter into a redemption agreement, it’s a contract between the business entity itself and its co-owners (including you). Under the agreement, a withdrawing co-owner’s ownership interest must be purchased by the entity when a triggering event occurs.

 

Both types of agreements have three main goals. ... Log in to view full article.

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