Therefore, the role of the manager is similar to that of a trustee of a life insurance trust (but with less responsibility) and a fiduciary agent. In this way, the parties can be confident that the life insurance proceeds will be used for their intended purpose. In addition, the insurance policies that insure surviving members continue to belong to Insurance LLC, which is now owned by surviving members, and all cross-purchase obligations between them under the operating company`s purchase-sale agreement remain intact. There are a number of reasons why companies rely on purchase contracts. Even if you trust your co-owner to bring their word to them, a written agreement can provide security for everyone involved. The list of features of successful buy-sell agreements below comes from my book Buy-Sell Agreements for Close and Family Entrepreneurs. With any business agreement, it is important to have an advisor framework, and for that particular agreement, having a legal team and a business advisor at the table, as well as a life insurance advisor, can be invaluable. In addition to controlling ownership of the company, purchase and sale agreements define the means of assessing the value of a partner`s stake. This may have uses outside of the issue of buying and selling shares. For example, in the event of a dispute between the owners about the value of the business or the interest of a partner, the valuation methods included in the purchase and sale contract are used.

Purchase and sale contracts are often used by sole proprietorships, partnerships and private enterprises to facilitate the transfer of ownership when each partner dies, retires or decides to leave the business. Bankruptcy. Most buy-sells prepare for an owner`s bankruptcy by prescribing that the remaining owners and the corporation have the option to purchase the bankrupt owner`s interests, rather than being forced to tolerate an insolvency administrator as the new owner of the business. .