What Are Cross Purchase And Entity Purchase Agreements?
These are agreements that arise in different context. In the purest context, cross purchase agreements and entity purchase agreements are two types of what are more commonly referred to as buy/sell agreements. Where if there is more than one owner of the business and one of those owners dies or becomes disabled, either the other owner or the business itself would buy the stock of the business owner who has died or has become disabled.
In the context of business succession planning, often, for example, if the senior generation that runs the business is passing ownership on to the next generation and that next generation consists of two or more children who are part of the business, then the next generation is going to want to have a cross purchase agreement or an entity purchase buy/sell agreement so that if one of them were to die or to become disabled, their interest could be purchased by the other owners of the business and the family of the deceased owner could be paid for the value of their interest in the business.
The Main Reasons To Create A Business Succession Or Exit Plan
The reason to create a business succession or exit plan is that it is the only way that the business owner can enjoy the fruits of everything that he or she has put in during his or her lifetime in order to build up the value of the business. If there is no succession plan then that business cannot be transferred to the next generation. The new business owner cannot be paid for the value that the previous business owner had built up before retirement or death. The only thing that will be realized by the family of the business owner is whatever the liquidation value of the business is and where the assets and the receivables are sold for some dollars.
Do All Estate Planning Attorneys Handle Business Succession Planning?
No! All estate planning attorneys do not handle business succession planning. Business succession planning is sophisticated planning. There are many estate planning attorneys who are very comfortable drafting wills and mainstream trusts for their clients who do not have the kind of sophisticated background or the training that is necessary in order to do this type of planning.
The Professionals Required To Assist In Business Succession Planning
Business succession planning works best when there is a team of professionals. That is because not one single professional who has all of the skills necessary in order to help a client with a successful business succession plan can do it without a team of professionals. The three key professionals that are needed are the attorneys who can do the legal work, the CPA who can run the numbers and help determine what the value of the business is and what kind of cash flow the business is going to produce to pay for the business. Then the third type of professional is the financial advisor who can help determine how much the business owner is going to need to net when he or she passes along the business in order to maintain the lifestyle that they want to maintain in retirement.
Are Estate Planning And Business Succession Planning Intertwined?
Estate planning and business succession planning go hand-in-hand because all estate planning is doing the things that help a client be confident and secure that they, their loved ones in their legacies are protected. By passing along the business, that is their legacy, they want to do it in the manner that is going to protect and provide for their loves ones. Business succession planning is just part of the overall estate planning that a client does in order to make sure that they, their loved ones and their legacies are protected.
Unique Attributes Of Estate Plan Strategies, LLC. In Handling Business Succession Plans
What sets our firm apart is we have both the knowledge and the training in terms of sophisticated tax knowledge and in terms of the fact that we have done so many successful business succession plans for successful business owners.
For more information on Cross Purchase And Entity Purchase Agreements, a FREE initial consultation is your next best step. Get the information and legal answers you are seeking by calling (314) 542-2210 today.
Get your questions answered - call me for your free, 20 min phone consultation (314) 542-2210