Harvey H. Gilbert, Esq., P.C.

A Professional Corporation for the Practice of Law

Business Owners need internal Agreements

Brian and Jeffery Jackson have owned Jackson's Tax Services for the past 12 years. In a recent decision about the future of their business, they concluded that because they rely so heavily on one another for every aspect of running their enterprise, the loss of either one of them due to disability or death could have a devastating impact on the business.

Strategy

The two partners seek to develop a customized business protection strategy called a Cross Purchase Buy-Sell Agreement. It will help the ensure the continuity of the business should Brian orJeffery become disabled or die. At inception, the owners enter into an agreement that if either should become disabled or die, the survivor will buy out the business interest from the individual or his estate using an insurance policy for all or part of the payment. The partners each own policies on the other so that in the event of an incident, the policy proceeds will pay out to the policy holder and he will have a payment to use to acquire the shares of the other partner. In the event of the death or the disability of either owner, the disabled owner receives income or the estate receives policy proceeds in the event of a death. The remaining partner receives 100% of the shares of the company because he is able to pay the disabled partner or the decedent's estate what is needed to provide the surviving partner with complete ownership. An insurance company is vital to this purpose and will have many suggestions to refine this strategy for current or customized use.

Benefits

A buy sell agreement allows a smooth transition to a new ownership arrangement and it can reduce the potential delays , conflicts, and expenses of those making a claim on the business. The surviving partner will receive a "stepped-up" basis under this agreement for the interest he just bought thereby reducing the amount of taxable capital gain upon the future sale of the business interest. He also gets peace of mind knowing that an orderly succession plan is in place. Usually, the agreement will provide a firm and fair valuation plan for the interest being transferred.

We can arrange a customized agreement for you whether you are working with one or many other partners.The cost is modest and is insignificant when compared to the costs involved when no agreement is in place.Let us help you.

Services

Real Estate Transfers.

Land Use & other Realty

Business Transfers

Estate Planning

Collection

Domestic Relations

Municipal Court Defense

 

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Office Location

web-building 8669

Harvey H. Gilbert, Esq., P.C.
A Professional Corporation for the Practice of Law
122 Washington Street
Morristown, NJ 07960
973-538-8565 voice
973-538-6586 fax

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