<\/p>\n
Every business with more than one owner needs a buy-sell agreement to handle both expected and unexpected ownership changes. When creating or updating yours, be sure you\u2019re prepared for the valuation issues that will come into play.<\/p>\n
Issues, what issues?<\/p>\n
Emotions tend to run high when owners face a \u201ctriggering event\u201d that activates the buy-sell. Such events include the death of an owner, the divorce of married owners or an owner dispute.<\/p>\n
The departing owner (or his or her estate) suddenly is in the position of a seller who wants to maximize buyout proceeds. The buyer\u2019s role is played by either the other owners or the business itself \u2014 and it\u2019s in the buyer\u2019s financial interest to pay as little as possible. A comprehensive buy-sell agreement takes away the guesswork and helps ensure that all parties are treated equitably.<\/p>\n
Some owners decide to have the business valued annually to minimize surprises when a buyout occurs. This is often preferable to using a static valuation formula in the buy-sell agreement, because the value of the interest is likely to change as the business grows and market conditions evolve.<\/p>\n
What are our protocols?<\/p>\n
At minimum, the buy-sell agreement needs to prescribe various valuation protocols to follow when the agreement is triggered, including:<\/p>\n
\u2022 How \u201cvalue\u201d will be defined, \u2022 Who will value the business, \u2022 Whether valuation discounts will apply, \u2022 Who will pay appraisal fees, and \u2022 What the timeline will be for the valuation process.
\nIt\u2019s also important to discuss the appropriate \u201cas of\u201d date for valuing the business interest. The loss of a key person could affect the value of a business interest, so timing may be critical.<\/p>\n
Are we ready?<\/p>\n
Business owners tend to put planning issues on the back burner \u2014 especially when they\u2019re young and healthy and owner relations are strong. But the more details that you put in place today, including a well-crafted buy-sell agreement with the right valuation components, the easier it will be to resolve buyout issues when they arise. Our firm would be happy to help.<\/p>\n
\u00a9 2018<\/p>\n","protected":false},"excerpt":{"rendered":"
Every business with more than one owner needs a buy-sell agreement to handle both expected and unexpected ownership changes. When creating or updating yours, be sure you\u2019re prepared for the valuation issues that will come into play. Issues, what issues? Emotions tend to run high when owners face a \u201ctriggering event\u201d that activates the … Continue reading “Prepare for valuation issues in your buy-sell agreement”<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":805,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[254],"tags":[],"class_list":["post-806","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-valuation"],"_links":{"self":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/806","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=806"}],"version-history":[{"count":2,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/806\/revisions"}],"predecessor-version":[{"id":812,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/806\/revisions\/812"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/media\/805"}],"wp:attachment":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=806"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=806"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=806"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}