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Practicable buy-sell agreements are the remedy for the potential problems listed above. The different types of buy-sell forms usually include: secondly, the valuation method chosen today needs to be reviewed and updated over time. What is frustrating is rare. Few owners rejoice, for understandable reasons, in the “review and update of my buy-sell agreement” as a project or task. However, over time, the valuation method used in your buy-sell contract will likely be less and less up-to-date and relevant to meet your new reality. One day, there will be a triggering event. At this point, it is too late to make a change and the outdated valuation method or price can do more harm than good. It may include intellectual property, leases or other contractual rights or obligations. While the buy-sell agreement cannot/should not address all of these issues, the reference to them could offer a “relapse” if shareholders cannot negotiate an amicable remedy. Buy-sell agreements (also commonly referred to as shareholder or member participation agreements) are legal documents that identify situations in which ownership of the business may change ownership and then give instructions on how to handle each case. The best known example is what happens after the death of a partner. A buy-sell contract typically requires the heirs of the deceased owner to resell the shares in the business or the survivors at a certain price. This provision protects everyone: the heirs of the deceased owner receive a cash payment, while the remaining owners advance without unwanted consideration.

Most purchase and sale agreements have provisions to deal with the death of a shareholder or other triggering events such as retirement or severe disability. Often, business owners think seriously about buy-sell agreements after having already entered into other agreements that may affect the effectiveness of the buy-sell. Examples include statutes/organizations or partnership agreements, company statutes/agreements, loans or guarantee agreements, franchise agreements and lease agreements. . . .