Buy-Sell Agreement:
Buy-sell agreements are contractual
obligations of closely-held companies or partnerships that provide
for liquidation
of an interest of a withdrawing or deceased owner.
Buy-sell agreements that may contain
provisions that address values directly or may impose restrictions on
transferability. These agreements maybe binding on both parties or
on one of the parties only.
Buy-sell agreements should not rely on a formula or book value approach to
determine the value of an
interest because these approaches could result in an inaccurate assessment
of the interest’s value. The best
way to determine an accurate value of an interest for buy-sell agreements
is by engaging an independent
business
valuation professional to determine what an owner's
interest is worth, based upon the
provisions
of the agreement.
A professional prepared business valuation
report will incorporate current
economic conditions
and help assure fair treatment to all concerned parties.
Also, if prepared on a consistent basis,
the business valuation provides an ongoing analysis of the business'
performance.
Often a Valuation Calculation is a cost efficient means of performing
valuations for buy-sell purposes.
