Business Valuation

Buy Sell Agreements

Business owners need to have an exit strategy. As part of that strategy, a Buy and sell Agreement in Atlanta must be drafted and documented to avoid costly litigation down the road among shareholders. Many owners do not have a plan or a well thought out valuation methodology to be used when liquidity events take place. This causes inaccurate valuations and dissent among shareholders.
A well-crafted Atlanta buy and sell agreement provides instructions if an owner dies, becomes disabled and unable to work, gets divorced, or decides to leave the business in retirement or because of a conflict with other shareholders. Buy sell agreements also place restrictions on who is permitted or required to purchase a departing owner’s interest. They also stipulate - as stated above - how that interest will be valued and what constitutes a buy-out event.
Owners Death or Divorce
A buy event could be an owner’s death or his/her divorce. A succession plan should be in place for an owner’s death so heirs don’t automatically inherit the deceased owner’s ownership interest in the business. A better option might be to allow management to buy in to the organization using a certain valuation and/or methodology. This would certainly bring a higher value. Divorce decrees are usually written to transfer shares to an ex-spouse, who might not have any interest in the business

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Atlanta Buy and Sell Agreements

Heirs or Former Spouses
Buy/sell agreements can be structured to prevent heirs or former spouses from having any managerial control. They do this by mandating that the owner’s interest must be purchased by other owners or the business itself given one of these events. A life insurance policy on the owner (s) can ensure cash will be available in such a liquidity event.
What is an owner wants to voluntarily exit the business because of retirement or shareholder dissent or conflict? Atlanta buy and sell agreements can address these situations as well. The departing owner will want fair compensation while the remaining owners will want little risk as to what happens with the departing owner’s business interest.
Valuation
When a triggering event happens, as stated, a buy and sell agreement specifies who is to buy departing shareholder’s interest. The next step is deciding on a fair purchase price. Here the agreement defines an agreeable method for valuation of ownership interests, can avoid costly litigation. It’s best to do a valuation once a year using a valuation expert. Moreover, it’s optimal to agree on a fair system in advance rather than arguing over share value in court where a judge can decide when emotions can be running high.

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