Phoenix / Mesa Law Firm Helps Companies Understand the Importance of a Buy-Sell Agreement

    PHOENIX / MESA, AZ, June 09, 2009 /24-7PressRelease/ -- Establishing and properly funding a buy-sell agreement are vitally important business practices of a successful company.

"If you have business partners, you need a buy-sell agreement," says attorney Scott F. Gibson, one of three founding partners of Gibson Ferrin & Riggs, PLC. "Ideally, you should prepare the agreement when you set up the company."

But it's never too late, says Gibson, who has been practicing business law for more than 20 years. "If you have not already formed a buy-sell agreement, do so immediately to ensure that you have a plan in place to address the transition of the business."

Partner Michael L. Ferrin adds that while establishing such an agreement is a good start, it is not enough.

"It must also be properly funded. That funding generally comes through life insurance policies," states Ferrin.

This is an important point not to be overlooked, Ferrin points out. "An inadequately funded buy-sell agreement is almost as devastating as no buy-sell agreement."

Gibson says that failing to plan for and deal with these issues are just some of the mistakes that business owners often make.

In his new e-book, "Ten Fatal Mistakes that Business Owners Make (And How to Avoid Them)," Gibson examines potential dangers that loom when a company fails to establish and properly fund a buy-sell agreement as well as looking at other important issues. By giving real-life examples, he illustrates how easily these mistakes can arise in any business and offers specific advice on how to prevent them.

The free e-book is downloadable from the firm's website at www.gfrlaw.net/firmpublications.aspx.

Gibson says that failure to plan for such things as the termination of business relationships leaves companies vulnerable.

"Successful businesses plan how to terminate their business relationships before one of the owners wants out," Ferrin says.

"A buy-sell agreement typically addresses terms on which one owner can sell his interest to the other owners, setting forth the methods of calculating the purchase price and of establishing the terms of sale," Ferrin explains. "Not only does it provide a mechanism for resolving impasses between owners, but it also provides an orderly way to handle the death, disability, illness, bankruptcy, divorce, or retirement of one of the owners."

Without a buy-sell agreement, drawn-out and contentious litigation can ultimately lead to a company's demise, he cautions.

Ferrin stresses that the agreement should be regularly reviewed and updated as needed, particularly when the value of the company increases.

"It should have a source of funding available to allow the surviving owner to purchase a deceased owner's share of the business," Gibson says, "but that can change over time."

Gibson says the solution is to review the buy-sell agreement with legal counsel at least every two to three years.

"If the agreement is not adequately funded, an untimely death may force the survivors to sell the business at a loss to pay estate taxes or to pay off the estate of the deceased owner," he says.

About Gibson Ferrin & Riggs, PLC

The attorneys at Gibson Ferrin & Riggs, PLC concentrate their practice on serving individuals, families and small business owners with business-related issues, family law and estate planning. They can help identify and assess the things that matter most to their clients and work to preserve, promote and protect them. Visit their website at www.gfrlegal.com and their blog at www.biziboom.com. The firm's expertise in commercial litigation and business, family and estate law is recognized throughout the Phoenix / Mesa area. Call attorney Scott Gibson or Michael Ferrin at 480-633-8100 with any questions on business law or to schedule a confidential and comprehensive consultation.

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