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Dianne Williams, MBA

Certified Retirement Counselor®

Since 1983 in the financial services and investment industry

 

Retirement Pathways, Inc.

4965 U.S. Highway 42, Suite 1000

Louisville, KY 40222

 

Phone:  502-797-1258 

 

Email: dianne@retirementpathways.com

Website: www.retirementpathways.com

May/June 2019

Buy-Sell Agreements

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According to the Small Business Administration, there are 30.2 million small businesses in the United States. If you are among these legions, there may come a time when you want to sell your firm — especially if nearing retirement age in the next decade.


To make the most from a potential sale, which funds a good part of many owners’ retirements, you may want to create a plan long before leaving your company. For many, this strategy will include a buy-sell agreement, which addresses the events that could trigger a sale.


Why Bother
A buy-sell agreement provides a preset way to sell your business when you move on. Without a plan, you could find it difficult to sell your business for top dollar and, in less vibrant economic times, you might even have to conduct a fire sale of sorts due to a lack of buyers.


A comprehensive agreement can help anticipate these and other challenges and may include measures to address them. The agreement, for example, should include all the events that could trigger the sale of your business. They include voluntary events such as retirement and disagreement, and involuntary events like death and disability.


Include Safeguards
You may want to include other language to protect your rights and those of any partners. Provisions to address include the method used to value the business, who would conduct the valuation and guarantees that give partners or other stakeholders first rights to purchase the business or a share of it from the departing owner.


Funding Methods
Importantly, you also may want to pre-fund a future sale. Your company might consider life insurance benefits to fund business succession in the event of an owner’s death. Putting aside money and investing periodically toward this end are two other ways to prepare for a future sale. Using company profits after-the-fact could be precarious because it could make needed capital less available and may put the previous owner investment in the company at risk.


Consult with your legal, tax and financial professionals to develop a buy-sell solution that is right for you and your business.


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