Tags: buy | sell | arrangements | business | survival

Buy-Sell Arrangements Critical for Business Survival

Buy-Sell Arrangements Critical for Business Survival
Nikolai Sorokin | Dreamstime.com

By    |   Sunday, 25 March 2018 06:54 PM

The survival of a family or other closely-held business is difficult even under the best of circumstances.

The marketplace is full of external risks and dangers which never go away.

Competitors never give up. Even when old ones fade away, new competition always takes its place.

Financial constraints, government regulation, taxes, changing technology, new products or services, an ever-shifting labor force, and more, are external forces which must be recognized and controlled.

How can a business reasonably control many of its potential internal business hazards and dangers?

What could happen if the business owners have a falling out?

How can a business cope with the death or disability of a major owner or key employee?

Would a divorce or creditor lawsuit result in having an ex-spouse or creditor suddenly and involuntarily becoming a hostile and unwanted new partner?

How can the value of business be frozen against the excess estate or inheritance tax?

Where would the money come from to meet the future financial funding requirements of a plan to meet all these internal risk exposures?

The planning mechanism that can provide certainty to these sure to occur risks to business survival is a buy-sell arrangement.

In my experience, the best time to organize a buy-sell arrangement among business owners is when the business is established.

If three people get together to form a business, they are usually in good spirits and full of comradery. It’s the best moment for agreeing to deal with sticky problems.  

But it is never too late even for a mature business. It just has additional complications to consider. 

Sometimes I compare this to getting a car with airbags and seat belts. You may not avoid the accident, but you can plan to survive it.

Essentially a buy-sell arrangement creates a guaranteed market for the purchase of a business interest that becomes available because of a death, disability, divorce, retirement, or as a key employee benefit.

Hand-shakes and promises don’t work. What is needed is a written agreement which details the reason for the agreement, the terms, and conditions which control, and pre-arranges the funding to make it all possible.

Drafting a buy-sell agreement to meet each business’s unique factors and objectives requires expertise and skill.

Use experienced legal and insurance professionals. Getting it right the first time takes skill. Fill-in-the-blank forms from the internet are only good for applying for credit cards or a fishing license.

Would you like to eliminate risks that could end the continuance of your family or closely held business?

Properly funding a buy-sell arrangement goes a long way to assuring a business’s survival—at least to the next problem. 

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

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Financial constraints, government regulation, taxes, changing technology, new products or services, an ever-shifting labor force, and more, are external forces which must be recognized and controlled.
buy, sell, arrangements, business, survival
457
2018-54-25
Sunday, 25 March 2018 06:54 PM
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