BUY-SELL AGREEMENTS & BUSINESS SUCCESSION PLANNING David M. Knasel, Esq. Dominion Business Law PLC Tysons Corner | Leesburg, VA

Disclaimer Information presented is for general informational purposes only. It is not legal advice and should not be relied upon. Every situation is unique. Consult with an attorney for any specific case.

Defining Terms Business Succession Plan = A plan for what will happen when an owner of a business is no longer able or no longer wants to manage the business, due to:  Death  Retirement  Disability  Disagreement with co-owners... Etc.

A Critical Tool Buy-Sell Agreement = An agreement among the owners of a business to buy or sell their respective interests in the business under certain defined circumstances (e.g., death, retirement, etc.).  May be included within a Shareholder Agreement (corporation) or Operating Agreement (LLC)

Case #1: Two Amigos Construction Company  2 Owners  50 / 50 split  Both Amigos are married with children  Other family members not involved Issue: What happens if one of the Amigos dies?

Case # 1 Continued Without a Plan... Wife of deceased Amigo inherits 50%  Has partial control and share of future profits  Gets no value from what her husband built Goal = Surviving Amigo gets control of company and family of Deceased Amigo gets value of his share of the company. … But how?

Case # 1 Continued A Buy-Sell Agreement! Surviving Amigo buys Deceased Amigo’s share of the company from his estate. But what if Surviving Amigo does not have money? Answer: Life Insurance

Case #2: Mom & Daughter Realty Co.  Mom and Daughter 1 in business together  Daughter 2 not involved  Operating Agreement provides that share of business may be left by Will  Mom amends her Will to leave the business to Daughter 1 only  Mom may make adjustments in other gifts to treat both daughters equally

Case #3: The Retiring Dentist  60-year old Dentist with established practice  No partners or family members to take over  Brings on Young Dentist to purchase and take over practice  Retiring Dentist gradually cuts back his workload as Young Dentist takes over  Retiring Dentist gets funds from sale of practice for retirement

Good Candidates for Business Succession Planning  Businesses with multiple owners/partners  Family Businesses  Business Owners approaching retirement  Professional Practices (Dentists, Doctors, Accountants, etc.)  Restaurants and Retail  Construction and Real Estate

Dominion Business Law PLC The Planning Process:  Discuss Plans, Goals, and Dreams  Analyze the “What If...?” Scenarios  Develop Plan  Prepare and Implement the Agreement Testimonial

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