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Carefully drafted buy-sell agreements help establish fair
market value for federal transfer tax purposes and they have
the ability to maximize the value of closely-held businesses.
This is especially true if an independent valuation analyst
assists in the determination of the value, not just for tax
valuation purposes, but for purposes of the buy-out transaction
itself. Recent court cases have held that the reasonableness
of the valuation performed would be assessed based on the
factors in existence on the date the agreement was reached
versus the facts in existence on the date of death.
Some purposes of a buy-sell agreement may be to provide:
· continuity to the business;
· the corporation with the funds necessary to purchase
the shares of stock owned by a decedent shareholder and;
· a method for the shareholders' spouses to receive
sufficient income while allowing the spouses to get out
of the business.
Dorazio Law Group, P.C. can assist you with your legal needs
in drafting the appropriate provisions into the buy-sell or
shareholders' agreement based upon your company's individual
needs. The firm involves the Certified Public Accountant early
in the process to determine such choices as whether the assets
should be valued at current or historic values and whether
LIFO or FIFO should be used in valuing inventories.
Another legal consideration in this area involves minority
shareholders. Each state provides certain statutory rights
and remedies for minority shareholders. Majority shareholders
have many techniques to discourage and eventually freeze out
minority owners and judicial protections alone are not sufficient
to be relied upon.
For details, please contact Dorazio Law Group, P.C., at 724-934-6325
or email at info@doraziolawgroup.com.
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