Category Archives: Business Law
If you are asking this question, the answer is probably YES. So, let’s start with “what is a buy-sell agreement?” In short, a buy-sell is an agreement between you and the other owner(s) of your business that lays out what would happen if you or another owner no longer wants to or no longer can continue owning the business.
Who needs a buy-sell agreement? Basically anyone with a partner. If you are not the sole owner of your business and you care about what would happen to your share of your business or your partner’s share, you must get a buy-sell in place.
The two most common times a buy-sell matters is if your relationship with your partner goes south, or if one of you dies. Let’s look at those two scenarios a little closer:
1. One of you wants out. Whether it be because your partner lost his or her passion or the two of you don’t get along anymore, or something else entirely, it is very possible that one of you will want out of the business at some point. Without a buy-sell in place, your business partner can most likely sell his or her interest in the business to anyone. That means that you could end up being partners with the highest bidder. Do you like the buyer? Doesn’t matter. Now you’re partners. If you have a buy-sell, your agreement would stipulate what happens if one of you wants out. The most common setup is that the partner that remains in the business has the right to purchase the departing partner out under pre-agreed terms.
2. One of you dies. Do you want to be partners with your partner’s spouse? What about his or her children? Without the proper planning in place, that’s exactly what will happen if one of you dies. It’s not fun to think about, but bear with me. Suppose you die. If you have no planning in place, your spouse and/or children (depending on your family setup and what state you live in), will inherit your business interest. If you aren’t married or don’t have kids, it will be your parents and/or siblings. Do they even want to operate your business? Many times the answer is no. You know what would make their lives much easier? Money. That’s something a buy-sell agreement can provide. The agreement can essentially obligate the business to buy your ownership interest out if something happens to you. Many times that purchase is funded with life insurance that the business carries on you. That way, the business doesn’t have to maintain a huge cash reserve to fund the buyout.
So, if you have a business partner, you need a buy-sell agreement. The money you spend getting that agreement in place pales in comparison to the money, time and grief that will result if you need the agreement but don’t have it. Buy-sells are a funny thing- you do not need it until you need it, and then it’s too late.
If you would like to discuss your business in more detail with one of our attorneys, contact us today.
For Missouri residents, businesses or organizations, if you purchased an LCD flat screen television, computer monitor or notebook computer (laptop) between January 1, 1999 and December 31, 2006, you are eligible to file a claim and receive a $25 cash payment per item. The claim forms are on the Missouri Attorney General’s website and can be completed online. The process is very simple and only consists of a few questions about the number of purchases. Missouri residents, Missouri business and non-profit organizations are eligible under the national LCD settlement. Businesses and organizations with large purchases could recoup thousands of dollars. No actual receipts are required. The deadline for submission is December 6, 2012.
In 2012, credit card processors have been reporting all gross credit card transactions processed for businesses to the IRS; you will receive a form 1099-K for these gross receipts. Your business may have received a form 1099-K from your credit card processor last year (for 2011). This is required by tax code Section 6050W, which was designed to assist the IRS in identifying businesses not filing accurate tax returns.
Starting in January 2013, the IRS will begin imposing a 28 percent withholding penalty on all credit card transactions, if a business or firm’s taxpayer identification number (TIN or FEIN) and the legal name on each account does not exactly match with IRS records. Check your 2011 1099-K and make sure that your legal name and TIN are an exact match to that reported on the form. If there is a discrepancy on the form, if there are abbreviations or misspellings of your name, if your business has changed names or if you are using a new fictitious corporate name, contact your credit card processor immediately. Make sure that you are in compliance with these new IRS requirements by the end of the year to avoid the possible 28 percent withholding penalty that starts January 1, 2013. This is your last chance to make sure that you have matched your exact legal name and your federal tax identification number with your credit card processor or 3rd party payment aggregators (such as Square or PayPal). There is no reason to risk the 28% withholding penalty when it can be easily avoided.