A buy-sell agreement allows a partner or stockholder in a closely held business to acquire the interest of a partner or stockholder who withdraws from the business. The agreement may contain a designated price, or a formula to determine the price that the remaining owners of the entity will pay to acquire the interest. The price or the formula needs to be updated periodically. Payment terms and conditions of sale are also generally provided. Clients and their attorneys frequently rely on Trugman Valuation Associates to assist them in drafting the proper wording to insure that valuations are performed in accordance with the clients’ wishes.
Trugman Valuation Associates can assist in making sure that the agreement is worded clearly so that the valuation process is without ambiguity. This will often involve establishing at least the following:
- The appropriate standard of value to determine value in accordance with the wishes of the parties to the agreement
- The procedures to be employed to ascertain the value; e.g. a fixed formula or the process to obtain an actual valuation
- The appropriate valuation methods to be used by the business valuation analyst