Buy Sell Agreement Business Valuation

Litigation can cost up to a hundred times what it would have cost to establish a formal agreement. The few thousand dollars entrepreneurs spend today could save millions in the future. It is important to define value as part of the buy-sell contract, because “value” often means different things to different people. Here in our Texas office, we hear from shareholders who want to measure the “fair market value” of their interests, that is, the price that the universe of hypothetical buyers and sellers would pay for a business interest. A buy/sell contract is usually structured in two ways – as a cross-sale or withdrawal contract. Customers should consider including the following provisions (either in the buy/sell agreement or in LLC`s business agreement) when considering a buy/sell agreement for LLC members: Planning Tip: Get an opinion on the comparability of an agreement with industry standards. The taxable person bears the burden of proof that an agreement complies with that standard. Ensuring that the terms of the purchase-sale agreement are written down and that owners agree to these terms before a triggering event occurs helps eliminate potential conflicts in the future. At the time of the execution of the purchase-sale contract, no owner knows who will be redeemed, when or why. In addition, relations between the owners are probably good at this stage, so they should be able to reach a consensus on the conditions. . . .