Why Buy-Sell Agreements Are Important

Buy-sell agreements are important for all businesses. Yet they are often misunderstood by even veteran business owners. Understanding the purpose and functions of buy-sell agreements is vital to successful long-term operations and profitability.

Buy-Sell Agreement Functions

• Provide a way to preserve original ownership of the company by limiting how company assets can be disbursed.
• Offer a market for ownership of closely-held businesses.
• Deliver business owners with acceptable methods to value their ownership interests.
• Protect owners of S Corporations from tax treatment IRS problems.
• Provide LLC and S Corp owners sufficient annual distributions to pay personal tax obligations.
• Offer ways to allocate company control issues among owners.

Closely held companies are typically dependent on the talent and hard work of their owners. Buy-sell agreements clarify the future of smaller organizations. However, effective agreements require serious thought to the future and meticulous planning. You’ll want to avoid negative tax consequences for owners, including ethical issues that must be addressed with these agreements.

Accept that, for most entrepreneurs, executing buy-sell agreements, challenge business owner objectivity. They’re not thinking about selling or leaving their special relationship with their company, their brain child. Yet, prior to startup is the perfect time to create a protective buy-sell agreement.

To clear away the confusion surrounding buy-sell agreements, contact Sackett & Associates Insurance Services located in Sonoma County, California. Their professionals will give you the advice you need to create an appropriate buy-sell agreement to protect you, your business and your family. These agreements protect your business should you die, face divorce or owner disagreements that could destroy your company.