Let’s take a moment to talk about your buy-sell agreement—because when life changes, your business should be ready. First…
Does your agreement spell out what triggers a buyout? We call them the five Ds:
Death… Disability… Divorce… Departure… and Disagreement. Each one can impact ownership—and your future.
Make sure terms like disability are clearly defined. And ask yourself— should the buyout be required… or just optional?
Next… How is the value of the business determined? Some agreements use a fixed number or a formula— but what if last year was unusually strong… or weak? A smarter approach? Get a professional valuation at the time of the buyout—
and agree on how to choose the appraiser.
Third… Let’s talk about how the buyer pays.
How much cash is needed up front? What are the terms of the promissory note?
And if you’re using life insurance to fund a buyout— make sure it’s enough.
If the business owns the policy, be aware of possible estate tax issues— especially after the 2024 Connelly decision.
Finally… If you’re unsure whether your agreement is up to date, connect with your Truist commercial banking team— and your Truist advisor to help review and strengthen it.