A buy-sell agreement (buy and sell) is a legally binding contract agreed upon by partners in a business that specifies how a partner’s share of the business will be re-assigned or transferred upon death, disability, retirement, or exit.
While many business partners would prefer to “kick the can down the road”, having an agreed upon process in advance can save a lot of headaches and legal fees.
The buy-sell agreement will define a method for determining how the shares will be valued. This may be as simple as using a formula, or, it could trigger a fair market value appraisal of the shares.
The shares may be purchased by the business or the remaining partners. In either case, the shares must be valued. A current, professional valuation of the shares can be especially useful since the business will transform over the many years since the buy-sell agreement was initially put together. The appraisal will account for current market conditions, growth, risk, and determine requisite discounts for lack of control or marketability of the shares.
AMP Business Valuations is a leading provider of fair market value appraisals for small and medium-sized businesses. Contact us today for a quote.
