A buy-sell contract is one of the most important agreements an individual company can have. This agreement structures the method and how the transaction continues in the event of the owner`s death. In a 2003 article for Franchising World magazine, Patrick Olearcek stated, “The owner and one or more important employees enter into an agreement that the owner`s estate will fatally sell the business to the employee.” By accepting the purchase of the business, the key employee or employee relieves the owner`s family of its responsibilities and instead provides a lump sum payment. Unlike the owner`s family, an important employee is in a much better position to continue his activities properly. In the basic forms of the contract, you can adapt your repurchase contract using different clauses, options and requirements to your specific business. After reaching a general agreement on the terms and conditions, participants begin to negotiate the final business sale contract. During this time, the buyer performs a thorough audit of the company called Due Diligence. The parties exchange documents and verify other items to ensure they have an accurate picture of the transaction. Inheritance tax, if due, will be due to Confederation nine months after death.
In some countries, death taxes are due even earlier. The buy-sell contract not only provides a buyer for business interest, but also indicates the value or method of valuation if the payment is made in a lump sum or in a installment and when it is made. If your estate is large and is subject to inheritance tax, your family will need enough cash to pay it. You want to be sure that they will be able to convert your share of the business into cash quickly and at a fair price. As part of a buy-and-sell contract, the sale of the shares can be done quickly, and your family can be spared the panic, how to pay property taxes. When it is agreed to ensure adequate income protection, ownership becomes less urgent. The disabled capitalist will not be a financial burden on the company and the owner will not be forced to immediately sell his shares to generate income. In the end, the seller will provide the buyer with a definitive, executed sales invoice that transfers to the buyer all the assets of the business sold under the under-edcing, free and exempt from all pledges, charges, security interest, debts or taxes of any kind. The seller also makes an affidavit indicating the seller`s power to sell and transfer the business and its assets. Finally, the seller transfers and sends the name of the alleged business to the purchaser and all other documents necessary to conclude this agreement. When a person is the sole owner of a business, regardless of the form of the unit, a particular problem arises when the owner dies, retires, is disabled or decides to leave the business.
Unlike a transaction with co-owners who can purchase the owner`s interest at one of the previous events, the owner will lose all the value accumulated in the business during many years of hard work. In fact, there are other problems.