Buyouts and Business Succession Planning

Buyouts and Business Succession Planning

By: Martin M. Shenkman, CPA, MBA, JD

Buy sell agreements and buyouts are crucial for every closely held business and business with more than one owner.

  • Problem: one technique for buy sell agreements is to make a certificate of stated values, but sometimes this happens once every twenty years. Make sure it happens more often.
  • Make sure you have plans for the spouse in the event of a divorce.
    a. Many couples sign a prenup that addresses the business.
    b. Have the spouse sign the bottom of the shareholder’s agreement, to show she acknowledges what will happen in the event of divorce or death.
  • In order to have a buyout agreement accepted by the service, you need to follow certain criteria including:
    a. Fixed and determinable price.
    b. Must be a bonafide business arrangement (document the reasonableness of it).

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