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Family businesses and buy-sell agreements

On Behalf of | Jul 21, 2014 | Sales & Dissolutions |

Michigan families dealing with business disputes may want to review the idea of developing a buy-sell agreement. Family-run businesses can experience unique challenges when there are disputes over decisions or when relationships sour. While problems are normal in a business, the responses in a family scenario can be emotional rather than rational. In fact, many family businesses face dissoultion or liquidation due to conflicts.

In many cases, issues arise due to differing financial approaches and philosophies. When some family members prefer to be fiscally conservative and others like to take risks, there can be disputes. With a buy-sell agreement, issues such as the buyout of one individual’s shares can be planned for in advance so that details are not worked out in an emotional scenario. In addition to addressing disputes, a buy-sell plan may help in cases of asset distribution during a divorce or in the handling of shares if a partner in a business dies. By establishing fair and reasonable terms ahead of time, a business may have a better chance to survive changes based on family issues.

It is important to consider interests such as who has the right to buy stock, how stock will be valued and how a buyout will be funded. It is also important to realize that reevaluation of a buy-sell plan should be completed every two to three years to ensure that as business and personal goals change, the business is prepared to deal with new challenges and interests.

Working with a business lawyer may be helpful as current plans are evaluated and as a buy-sell plan is created. A business lawyer may schedule regular reviews of such plans to ensure that an up-to-date strategy is in place.

Source: BedTimes, “Family feud: How a buy-sell agreement can save your family business“, Phillip M. Perry, July 19, 2014


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