Under a buy-sell agreement, when an owner dies, becomes disabled, or gives up ownership for some reason, the company or remaining owners may have to purchase the interest at stake. It is critical to fund the buyout. Without a practical funding plan, a company or its owners may have to pay out liquid assets in a lump sum at an inopportune time or declare bankruptcy. Without sufficient funding, a buyout provision could prove to have little or no value.

Read the complete article