Buy-sell agreements are an important business continuity tool that can assist a business in difficult transition times. Usually, the buy-sell agreement either contains a formula, or requires an annual determination of the price to be employed. All too frequently, the business owners do not revisit the formula to ensure that it remains sensible in light of the business’ recent performance and market conditions. Similarly, my casual observation is that the required annual revaluations contained in many of these agreements are more often not done, than accomplished.
Year-end is a good time to get this done. If you do not have a buy-sell agreement, or have one that has not been updated, address this as one of your New Year resolutions. At the risk of being too self-serving, an independent fee appraiser can and should assist in the valuation process. Of course, if you do not have the time to do this correctly before a buy-sell triggering event, you can also pay my firm a lot more to assist with the inevitable litigation that occurs when these agreements do not exist or are ignored.
