Most agreements were signed years ago, priced on a number nobody has looked at since, and never funded. Here is what that means the day it matters.
You and your partner signed a buy‑sell agreement when you started the company, or when the attorney insisted. It says that if one of you dies, becomes disabled, divorces or wants out, the other buys their share. It felt responsible. Then the business grew, the valuation formula stayed where it was, and nobody asked the harder question: where does the money come from?
That question tends to get asked on the worst possible day. A partner dies and the surviving owner learns the agreement obligates him to buy shares he cannot afford, from a spouse who now owns half the company and wants to be paid. Or a partner’s divorce puts a stake in front of a family‑court judge. The agreement is real. The plan behind it is not.
The obligation is written down; the cash is assumed. Term coverage bought at signing lapsed, or was never sized to today’s value.
A formula or a fixed number from year one, applied to a company worth three times that now. One side is badly overpaid or badly underpaid, and both know it.
Death is covered. Disability, divorce, retirement and a partner who simply wants out are not, or are covered differently, so the outcome depends on how you leave.
Cross‑purchase and entity redemption produce very different tax outcomes for the survivor. The structure chosen at signing rarely gets revisited when the numbers grow.
We read the agreement with your attorney and CPA: triggers, valuation method, structure and what actually happens under each one.
Life and disability coverage sized to the obligation, owned by the right party, so the money exists on the day the agreement is invoked.
The structure that fits your number of owners, your entity type and the survivor’s tax position, chosen deliberately rather than inherited.
A method your partners, their families and the IRS will all recognize, updated on a schedule instead of once.
Every one of these runs through the CORE Process™ — with your CPA, your attorney and your other advisors building from the same plan.
The agreement, the valuation and the funding say the same thing. If a partner dies, the family is paid in full within months, not years, and the company keeps running under the people who run it. If a partner leaves, the price is already agreed and the money is already there. The conversation you have with your partners is about the business, not about what a lawsuit would look like.
If you own a business with at least one other person, yes. Without one, an owner’s death or divorce can put their share in the hands of a spouse, an heir or a court, none of whom you chose as a partner. The agreement decides in advance who buys, at what price, and how it is paid.
In a community‑property state like California, a partner’s ownership can be treated as a marital asset. A well‑drafted buy‑sell agreement gives the other owners the right to buy that interest at an agreed price before it can be awarded to a former spouse. If the agreement is silent, or unfunded, the outcome is decided in family court.
Most commonly with life insurance owned by the company or by the other owners, sized to the agreed price, so the purchase is paid from proceeds rather than from operating cash or borrowed money. Disability coverage funds the same obligation when a partner is alive but can no longer work.
A short, private conversation to understand the whole picture — and whether our expertise can help.
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