The death of a shareholder, is the event most likely to trigger a buyout. Usually, the business buy-sell agreement provides for the mandatory purchase of the decedent's shares, first by the corporation, then, if it is legally unable to do so, by the other shareholders.
Determing whether to provide for mandatory or optional purchases on a shareholder's death is one of the most important decisions to be made when the business buy-sell agreement is drafted. If the corporation is expected to purchase the shares, the necessary source of funding must be available.
If the State you live in is a community property state, those issues must be reviewed and factored into the mandatory purchase in the buy-sell agreement. You should also retain competent tax counsel as it regards the tax implications if the shares are redeemed, as the redemtion distributions will be taxed to the remaining shareholders as dividends.
Contact Steven Peck's Premier Legal toll free at 1.866.999.9085 to talk to an experienced California Business Attorney and visit us on-line at www.premierlegal.org.
