Any shareholder, partnership, or LLC agreement that doesn’t include a well-crafted buy-sell provision triggered by an owner’s death, withdrawal, expulsion, disability, or other separation event is an agreement asking for trouble. Put otherwise, the absence of a public market for equity interests in a closely held business virtually assures that a poorly conceived or non-existent buy-sell agreement is a dissension and litigation breeder. The potential for hostilities exists both before and after a trigger event when the buy-sell provision fails to offer fair value, or fails to include the necessary parameters for an appraisal process, or imposes grossly unfair payment terms.
To the rescue comes estate planner and buy-sell agreement maven Paul Hood with his new book, Buy-Sell Agreements: The Last Will & Testament for Your Business. Paul’s background as a tax lawyer and estate planner, as well some family history involving a buyout of his grandfather when Paul was a boy, drew his interest to buy-sell agreements which became a major focus of his long career.
Contrary to its morbid subtitle, Paul’s book lays out in carefully organized fashion a detailed, comprehensive set of the practical, financial, tax, insurance, and other considerations that go into the drafting of a buy-sell agreement designed to allow business continuity and liquidity for a departing owner. The book is a terrific resource for lawyers and other professional business advisors. But it’s also written for business owners as an educational tool allowing them to have informed discussions with their professional advisor engaged to draft the business’s organizational documents including the buy-sell.
I recently interviewed Paul about his book and some of the issues surrounding buy-sell agreements for the Business Divorce Roundtable podcast. I guarantee you’ll find his commentary as sparkling as it is informative. I invite you to give it a listen by clicking the below link.