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The prudent rule prior to entering a business is to establish a formal
agreement for getting out of the business relationship. Buy and sell agreements allow the
business owner to transfer an interest in the business to other owners or to the business
itself. The agreement can guarantee a buyer for the business and eliminate difficulties
associated with transferring the business upon death or disability of one or more of the
owners. Conflicts among interested parties to the business may be minimized by clearly
establishing the definition of market value prior to the time of need. The value of a
company changes from time to time because of the economy and the prevalent industry
trends. A buy-sell agreement that is structured through a set formula of value will
consistently produce an accurate determination of goodwill. Goodwill is a critical
material element of the total true value of the company or business.
© Copyright 2002 by Delbert W. Exeter. All rights
reserved.
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