Partners need a buy-sell agreement.
Buy-sell agreements need a valuation.
Why a Buy-Sell Valuation
A buy-sell agreement is a legally binding document that determines how a partner or shareholder in a closely held business may purchase the interest of another partner or shareholder who withdraws from the business. Integrating a business valuation into a buy-sell agreement is often critical to ensuring that all shareholders are treated fairly and equitably if one executes the agreement. Likewise, the absence of a buy-sell often triggers a valuation during partnership disputes.
Buy-Sell Valuation Scenarios – Some of the most common scenarios include:
- Buy-Sell Requires a Valuation. In many agreements that documents call for an independent, third party valuation. (Think it might save some money to just include a pre-defined formula and skip the valuation? This might scare you straight).
- No Buy-Sell Agreement. Often times we wind up working to establish value when one shareholder wants out of a partnership. Those situations can be either friendly or litigious.
- No Buy-Sell
- Shareholder Litigation
- Initial Buy-sell
- Death of Shareholder
There are many types of events that trigger the need for a valuation amongst shareholders. Those may include: