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Unintended Owners - Forced Sale of the Company

21. June 2018 15:04

By:  Terrance K. Resnick and Leon B. Resnick

                                                                           (Part 3 of 6)

Bill and Will, two lifelong friends started a woodworking company together. Bill’s strengths were on the entrepreneurial side and Will brought blue collar talents to the team. They determined that company ownership would be held 55% by Bill and 45% by Will.

Although Bill and Will remained the closest of friends and business associates, neither was particularly close with the other’s wife as neither wife was actively involved in the business. Furthermore in the 25 years that Bill and Will owned the company, there weren’t more than a few times per year that the spouses stopped by the business. One day that all changed. Bill was in a fatal accident and because there wasn’t a properly structured and funded buy-sell agreement, Bill’s wife became the owner of his 55% interest. 

Bill’s wife and Will, now co-owners, talked and Will assured her that he would be able to keep the company profitable as it always had been. Even though Bill’s wife wanted to believe in Will she was not comfortable putting her financial future in the hands of someone she couldn’t know for certain could keep the business successful without Bill’s input. Bill’s wife decided to immediately sell…….during a down economy and for a sales price much less than what the company would have garnered during a more normal economic time.

Protect yourself and your business – Properly structured and funded Buy-Sell Agreements are a must!

Learn more about this topic during the Survive and Thrive - Assuring the Long-Term Success of your Company at IWF 2018.

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