Estate Planning and Business Law

Why Buy-Sell Agreements are Important to Business Owners

What happens to your business if you are disabled or die?

A Buy-Sell Agreement provides a plan for a seamless transition with minimal disruption to your business.

There are two categories of Buy-Sell Agreements:

  1. The Entity/Stock Redemption Buy-Sell Agreement;
  2. The Cross-Purchase Buy-Sell Agreement.

With the Entity/Stock Redemption Buy-Sell Agreement, the business buys either a disability or life insurance policy for each owner. The business pays the premiums and is the beneficiary of each policy. When an owner dies, the death benefit from the policy is paid to the business so that it can buy the deceased owner's interest in the company.

When the owner is disabled, the Buy-Sell Agreement has a pre-determined payment payable to the disabled owner for their interest in the business.

With the Cross-Purchase Buy-Sell Plan each owner buys a disability or life insurance policy for each owner. The business pays the premiums and is the policy beneficiary. When one of the owner's dies, the death benefit is paid to the business so it can purchase the deceased owner's interest in the business.

When an owner is disabled, the Buy-Sell Agreement has a pre-determined amount paid to the disabled owner for their interest in the business.

A well drafted Buy-Sell Agreement should confirm the following:

  • Who will buy the deceased or disabled business owner's share of the business;
  • Pre-determine the price the deceased owner's estate will sell their share of the business;
  • Define how the sale of the business interest will be financed and when the it will occur.

California Estate Planning Attorney San Ramon

At Blackwell, Santaella & Jahangiri Legal Services, LLP, our legal team has the experience in handling estate planning and probate matters. We can carefully evaluate your situation and determine whether probate or administration is necessary. Please don't hesitate to contact a San Ramon probate attorney at our firm by calling (888) 698-3951, or you can fill out our online case evaluation form.

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