Sales contracts only come into effect when a business owner dies, retires, goes bankrupt, is disabled or divorced. Comparing a sales contract to a marriage contract is a valid transaction – they settle when a co-owner leaves the store, just like when a couple will withdraw from a marriage. Typically, sales contracts only cover transactions that take place between business owners, which sometimes means they are only called buy-back agreements. Think carefully about the order of options and whether buy-out is optional or mandatory. Often, buy-sell agreements give the remaining owners the first option to buy the business on a pro rata basis. If the owners do not exercise this option, you should exercise special caution in designing the company`s commitment. For example, if the shareholders of a company C are required to acquire the shares of the outgoing shareholder but choose not to do so, the purchase of the C-Gesellschaft could be considered a constructive dividend for the other shareholders (because the company committed an act that facilitated a commitment of its shareholders). A well-crafted purchase and sale agreement is one of the most valuable tools a business can have to protect its value in the event of death, obstruction or divorce that affects one or more of the owners, and can also provide important business savings methods to manage both the voluntary sale of shares and the bankruptcy of a shareholder. In the absence of such an agreement, any of the events described above can even destroy a healthy business or force owners to cooperate with strangers without expertise in their business. Such an agreement not only protects the company, but the family of a deceased shareholder is fairly compensated for the property rights of his loved one, without depriving the company of the reserves it needs. Other objectives of a buy-sell agreement. In addition to determining the value of shares for estate planning purposes, other objectives for structuring a purchase-sale contract typically include: (1) creating a market for the owner`s business interests (e.g.
B by requiring a sale during certain triggering events such as death); (2) provide a price and conditions that are pleasant for both parties (e.g. B to reduce litigation and friction); (3) facilitate the sound management and control of commercial interests; and (4) provide cash to the family of a deceased owner in lieu of non-negotiable shares….