1400 Gables Ct #103 Plano, TX 75075
5601 Bridge Street, #300, Ft. Worth, TX 76112

Fort Worth Business Law Attorney Talks About Common Traps in Buy-Sell Agreements

Fort Worth business law attorney, Richard “Ric” Armstrong, discusses missed opportunities and snares to avoid when crafting buy-sell agreements.

When one co-owner leaves the business, whether by death, coercion or choice, your buy-sell agreement provides governance as to how company ownership transfers to the remaining owner(s) or to another owner (for example, a surviving spouse). However, if these agreements are vague or poorly written, confusion, complications and friction may result. Let’s look at a few of the most common mistakes with buy-sell agreements.

1. Failing to review/adjust fixed values

If you affix a specific value to each ownership stake (the “buyout amount”), you need to review and adjust that amount every couple of years or so. If the company grows and the buyout doesn’t, the company could take a huge hit when someone buys out for less than the true value.

2. Failing to Address Each Buyout Trigger Individually

Any number of different events may trigger the buy-sell mechanism, and not all triggers may require the same response. Take the time to address each potential trigger individually, and decide exactly what should happen in each case to avoid potential conflicts later.

3. Failing to Account for Funding

If the buy-sell agreement requires the company or partners to buy out a departing owner’s share, provision should be made to procure funding for that transaction should it occur (for example, a life insurance policy). Failure to do so can jeopardize the future of the company itself, especially if the business is young and cash-strapped.

4. Failing to Account for Taxes

In many cases, transfer of company ownership can trigger tax liabilities you might not have anticipated. This pitfall can often be prevented by proper financial structuring up front, or by working the potential tax liabilities into the agreement itself.

You can avoid these and other snares by enlisting the help of an experienced Fort Worth business law attorney in crafting your buy-sell agreement. For more information, call Armstrong The Law Firm, P.C., today at 972-424-L-A-W-S (5297).

www.planobusinesslawyers.com

Richard L. Armstrong, Principal

CLICK HERE FOR OUR FIRM RATINGS VIDEO

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest Posts

Address

Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297