Buying in to the right buy-sell agreement – Understand the tax consequences before you sign off

Description

Abstract: Buy-sell agreements are binding contracts that determine how (and at what price) ownership shares of a business will change hands should an owner depart for any reason. This article describes the purpose of a buy-sell, explains how they’re typically funded and explores a particular tax risk for C corporations. A sidebar warns of the dangers of using boilerplate valuation formulas for a buy-sell agreement.