Avoid Fixed Price Valuation Methods Like the Plague

A lot of Buy Sell Agreements use a common valuation method called the “fixed price” method.  It’s the easiest valuation method because the owners pick a number out of thin air and agree on a fixed value.  The agreed on number determines the buy out price after a triggering event.  Most Buy Sell […]

Avoid Fixed Price Valuation Methods Like the Plague 2014-03-01T09:13:06+00:00

Shot Gun Buy Out Clause

Recently a new client asked me to review his company’s Buy Sell Agreement because he and the other fifty percent owner of the company could not stand each other and were suing each other over the ownership of their four year old company that generated $20 million in gross revenue.  One man did […]

Shot Gun Buy Out Clause 2018-01-13T19:46:37+00:00

The Ideal Time to Review Your Buy-Sell Agreement

Mercer Capital’s article discusses a very important topic — when is the best time to review your company’s Buy Sell Agreement?

“Almost every privately owned company with multiple shareholders has a buy-sell agreement (or other agreement that acts as a buy-sell agreement).

If your business is like most companies, then you have […]

The Ideal Time to Review Your Buy-Sell Agreement 2018-01-13T19:46:37+00:00

Estate of Claudia Cohen – Deceased Partner’s Failure to Update Buy Sell Agreement Cost Her Heirs $11 Million

The 2011 New Jersey appellate court case of Estate of Cohen v. Booth Computers is the perfect bad example that should scare the * out of every owner of a valuable business that is owned by multiple owners.  I try and try to explain to my clients with valuable businesses how […]

Estate of Claudia Cohen – Deceased Partner’s Failure to Update Buy Sell Agreement Cost Her Heirs $11 Million 2018-01-13T19:46:37+00:00

Estate of Cohen v. Booth Computers & James S. Cohen

ESTATE OF CLAUDIA L. COHEN, by its EXECUTOR RONALD O. PERELMAN, Plaintiff–Appellant,

v.

BOOTH COMPUTERS and JAMES S. COHEN, Defendants–Respondents.

DOCKET NO. A–0319–09T2
July 13, 2011

On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-135-08.

Michael R. Griffinger argued the cause for […]

Estate of Cohen v. Booth Computers & James S. Cohen 2018-01-13T19:46:38+00:00

A Multi-Member LLC’s Most Important Document

Why Multi-Member LLCs Must Adopt a Buy Sell Agreement

A Buy Sell Agreement is the Members’ Exit Strategy. Don’t Go Into Business With Unrelated Parties Without an Exit Strategy

Bottom Line & Number 1 Reason Multi-Member LLCs Need a Buy Sell Agreement: Members of a multi-member LLC who DO not sign […]

A Multi-Member LLC’s Most Important Document 2018-01-13T19:46:38+00:00

Funding a Buy-Sell Agreement With Life Insurance

Exciting Developments in Buy-Sell Planning

This issue of the estate planning newsletter examines exciting new developments in business succession planning – specifically, the use of LLCs to own life insurance for buy-sell planning purposes. Such a structure obtains the advantages of cross-purchase and membership interest redemption buy-sell agreements without many of the disadvantages of […]

Funding a Buy-Sell Agreement With Life Insurance 2018-01-13T19:46:38+00:00

Buy-Sell Agreement Trigger Events

Photo of Z Christopher MercerBuy-sell agreements are designed to accomplish one or more of the following objectives from one or more of several viewpoints: the corporation, the employee-shareholder, the non-employee shareholder, and any […]

Buy-Sell Agreement Trigger Events 2018-01-13T19:46:38+00:00

Don’t Rely Upon Templates When Constructing Buy-Sell Agreements

This short article is a warning against the blind use of legal forms, or templates, for developing buy-sell agreements. Parties to each and every buy-sell agreement need to take time to agree on the key business and valuation aspects of their agreements, then have a qualified attorney (who can also be involved in reaching agreement) draw up the document. What could be simpler? All the parties have to do is to agree on the events that “trigger” the buy-sell agreement, on who buys stock, and on the pricing and terms of the purchase. Also, it is helpful if the funding for the transaction is specified, as well. The problem is, if my experience is any indication, these things are almost never agreed to at the level at which it is necessary for the shareholders to understand what will happen when their buy-sell agreements are triggered by the quitting, firing, retiring, death, disability, divorce, etc. of a shareholder.

Don’t Rely Upon Templates When Constructing Buy-Sell Agreements 2018-01-13T19:46:38+00:00

Treatment of Life Insurance Proceeds in Valuation

Many buy-sell agreements are funded, in whole or in part, by life insurance on the lives of individual shareholders, who may be key managers, as well. Life insurance is a tidy solution for funding when it is available and affordable. It is important, however, to think through the implications of life insurance from a valuation perspective whether you are a business advisor, business owner, or a valuation expert. The proceeds of a life insurance policy owned by a company naturally flow to the company.

Treatment of Life Insurance Proceeds in Valuation 2018-01-13T19:46:38+00:00

Recommended Valuation Process for Buy-Sell Agreements: Single Appraiser – Select Now, Value Now

Mercer Capital:  “The Single Appraiser, Select Now and Value Now buy-sell agreement valuation process is the one I recommend for most successful closely held and family businesses.  I prefer this single appraiser process as the best available alternative for fixed-price, formula, and multiple appraiser agreements.

In the Single Appraiser, Select […]

Recommended Valuation Process for Buy-Sell Agreements: Single Appraiser – Select Now, Value Now 2013-11-23T16:14:37+00:00

Is the Promissory Note in Your Buy-Sell Agreement Fair to All Parties?

Mercer Capital:  “Promissory notes are used frequently as a funding mechanism when buy-sell agreements are triggered.  However, most buy-sell agreements reflect very little thought or negotiation regarding the promissory notes that they contain. . . . Promissory notes issued pursuant to the operation of buy-sell agreements are fairly common and often do not […]

Is the Promissory Note in Your Buy-Sell Agreement Fair to All Parties? 2018-01-13T19:46:39+00:00