Buy-Sell Agreements: establish a Plan and a Business Value between the Business Owners of a business that details what is to occur upon the death of one of the Business Owners. (Can also deal with the situation where one of the Business Owners becomes disabled, goes bankrupt, retires, divorces, or wishes to sell their interest in the business.)

When is a buy-sell needed or useful?

• A buy-sell agreement is a necessity if a business (including a professional practice) is owned by more than one person.
• Also works between a single Business Owner and key employees.
• A properly drawn, valued and funded buy-sell agreement can prevent a disaster, such as a forced sale or years in court.

What to expect:

Overall, the buy-sell agreement gives everyone comfort and security that they will receive maximum benefit from the business that they worked a lifetime to establish. Other specific benefits are that it:

 Provides that the surviving Business Owner will purchase the deceased or withdrawing Business Owner’s share of the operation.
 Provides funds to hire a replacement for the deceased employee.
 Provides funds to the widow or widower to replace the salary of the deceased.
 Provides assurance to the surviving Business Owners that the business will continue in a successful manner, while providing the deceased Business Owner’s heirs with funds that will
enable them to meet their needs and pay estate tax and administration costs.

 Prevents an untimely forced sale.
 Sets forth the purchase price and how it is determined based on a pre-agreed to Business Valuation methodology.
 Creates a mechanism for providing the funds needed to make the purchase. One way to handle the problem is to require the purchase of life insurance. To meet this need, a “first to die”
policy, which pays a death benefit on death of the first Business Owner, ensures that funds are available for the buy-out regardless of which Business Owner partner dies first.
 Allows the survivor a smooth transition, and the deceased Business Owner’s family its fair share of the value of the business.
 Allows for the continuation of the profitable business under such circumstances.

Intellectual Property Appraisals: independently value the worth of specific intellectual property and intangible business assets such as equity interest, debt securities, preferred stock and receivables.

Intangible Appraisal Reports independently value the worth of specific intellectual property, such as:

• Patents and copyrights;
• Brands;
• Technologies and products (and their life cycles);
• Non-technology assets (services and support);
• Intangible business assets, such as equity interest, debt securities, preferred stock and receivables;
• Customers;
• Employees and workforce; and
• Other contingent assets, such as employment and non-competition agreements.

Intellectual Property Appraisals present valuable information in the manner and style expected by banks, institutional investors and their advisors, and may be used as an exhibit to a:

• Business Plan;
• Loan Request Package; and
• Private Placement or Confidential Memorandum for:
 Sale or purchase of a business;
 Obtaining loans or equity, and other
 Capital markets alternatives.

Intangible Assets are appraised for:

• Charitable contributions

• Allocation of an Overall Business Purchase Price –

 Financial Accounting Purposes
 Income Tax Accounting Purposes

• Pre-acquisition Assessment of Business Value

• Purchase of Selected Intangible Assets

• Reorganization and Bankruptcy Analysis

• Establishment of Appropriate Royalty Rates for Licenses

• Establishment of a Fair Inter-company Transfer

• Income Tax Planning and Compliance

• Ad Valorem Property Tax Exclusions

• Litigation Support and Dispute Resolution

• Business Formation and Dissolution

• Corporate Planning and Governance

Professional Intellectual Property Appraisals will include:

• IP valuation principles and theory,

• Financial analysis,

• Approaches and methods necessary to determine value, and

• Government rulings related to IP valuation.

Have a Business Valuation question? Contact Michael Gilburd.

Click Here To Read Part I

Click Here To Read Part II

Click Here To See III

Click Here To Read IV