A large number of North American business enterprises are family-owned or controlled by a family. Income produced by these family-run businesses generates more than 50% of the Gross National Product, according to Forbes.
With many family-owned businesses extending to the fourth generation and beyond, it’s imperative that these entities have buy-sell agreements that are written by tax lawyers experienced with this process.
What is a Buy-Sell Agreement?
A buy-sell agreement between two or more family members who go into business together is a legally-binding agreement that governs a change in ownership in the event one or more of the owners dies, leaves the business, is forced to leave the business, is disabled, or retires.
A buy-sell agreement is intended to protect the ownership interests of the remaining partners during critical transitional periods.
The agreement stipulates:
- the amount the departing partner or the surviving family will be compensated,
- who will be allowed to buy his or her shares of the business, and
- the circumstances that will generate a buyout.
Consult a Tax Lawyer for Help with a Buy-Sell Agreement in a Family-Owned Business
Whether your family-owned business is classified as a Partnership, LLC, or Corporation, Mendes Weed, LLP can help you plan for your business and prepare your buy-sell agreement that is customized for your business needs.
Representing Clients with Tax Litigation from the Fallout of a Buy-Sell Agreement
While we like to believe that going into business together as a family will be an amicable decision, it is not uncommon for family members to have a conflict with their buy-sell agreements, especially if they have properly prepared, discussed, and planned for potential issues and counseled by a tax attorney.
Mendes Weed, LLP can guide and counsel you through this process and hopefully alleviate some of your concerns.
For more information about buy-sell agreements in a family-owned business, your tax status as a result of a change in ownership, or tax representation in front of the IRS, please contact us.