What is the purpose of a buy-sell agreement?
о
A. To allow the business buyout in case of the owner's death
B. To protect business employees against loss of income due to the owner's
death
O
C. To help the business meet overhead expenses in case of the owner's death
D. To reimburse the business in case of a key employee's death

Question

06-06-2024
Business

Answered

What is the purpose of a buy-sell agreement?
о
A. To allow the business buyout in case of the owner's death
B. To protect business employees against loss of income due to the owner's
death
O
C. To help the business meet overhead expenses in case of the owner's death
D. To reimburse the business in case of a key employee's death

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-06-06T09:58:42-04:00

Final answer:

A buy-sell agreement assists in the smooth transfer of ownership in businesses, particularly during events like an owner's death, ensuring continuity and financial stability through predetermined arrangements.

Explanation:

A buy-sell agreement serves the purpose of facilitating the smooth transfer of ownership in a business, especially in events like the death of an owner. It provides a legal framework for the remaining owners to buy out the deceased owner's share, ensuring business continuity and financial stability.

For example, in the scenario provided, if Mr. Johnson had a buy-sell agreement in place, it would specify how his share of the business should be handled upon his death, preventing uncertainties and disputes among the surviving owners.

This agreement is crucial for business succession planning and helps mitigate potential disruptions by outlining the steps and financial arrangements that should occur in predefined triggering events.

Learn more about buy-sell agreement in businesses here:

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