Do you have a plan in place to retain the value of your business interest in case of death or disability, or will your beneficiaries inherit your share? Will your beneficiaries be able to sell the share at a fair price? Will your partners have the means to buy your share? Will your beneficiaries have to work on order to receive any value out of the business?
If you are concerned about any of these questions, you need a buy and sell agreement.
In terms of a buy and sell agreement, you and your business partner(s) agree that in the event of any of you passing away or becoming permanently disabled, the other partner(s) will buy the deceased or disabled partner’s interest in the business at a certain price (predetermined or determinable by a specific method).
This transaction can be funded by your partners with –
- Cash in hand;
- A bank loan; or
- Each partner taking out life and disability cover on the other partners’ lives.
It is important that your buy and sell agreement is correctly structured, signed and kept up to date.
Contact us to assist you with drafting your buy and sell agreement or to review your existing one.