Illinois Buy-Sell Agreement between Two Shareholders of Closely Held Corporation

• Category: Corporations - Contracts
• State: Multi-State
• Control #: US-02553BG
• Format: Word; Rich Text

Description

A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly. Many of these types of corporations are small firms that in the past would have been operated as a sole proprietorship or partnership, but have been incorporated in order to obtain the advantages of limited liability or a tax benefit or both. A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights. Illinois Buy-Sell Agreement between Two Shareholders of Closely Held Corporation Keywords: buy-sell agreement, Illinois, shareholders, closely held corporation, stock transfer, business succession, cross-purchase agreement, redemption agreement, trigger events. Description: A Buy-Sell Agreement is a legal document commonly used by shareholders of closely held corporations to govern the transfer of shares in the event of certain trigger events. In the state of Illinois, such an agreement provides a framework for the orderly transfer of stock between two shareholders or more. In the case of a Buy-Sell Agreement between two shareholders of a closely held corporation in Illinois, there are typically two main types: the Cross-Purchase Agreement and the Redemption Agreement. 1. Cross-Purchase Agreement: This type of agreement allows the remaining shareholder(s) to purchase the shares of a departing shareholder. In this scenario, each shareholder agrees to buy a proportionate amount of the departing shareholder's stock. For example, if one shareholder decides to leave the corporation, the remaining shareholder(s) will purchase their shares in proportion to their ownership percentage. The purchase price is usually predetermined or can be based on a mutually agreed-upon valuation method. This agreement is beneficial when there are only a few shareholders involved. 2. Redemption Agreement: In this type of agreement, the corporation itself agrees to purchase the shares of a departing shareholder. The corporation will redeem the shares using its own funds or through an agreed-upon payment plan. This option is more commonly used when there are multiple shareholders involved, and it simplifies the process by allowing the corporation to buy back the shares from the departing shareholder. The Illinois Buy-Sell Agreement between two shareholders of a closely held corporation should also include specific trigger events, or situations in which the agreement is activated. These trigger events may include the death of a shareholder, disability, retirement, bankruptcy, divorce, or other predefined circumstances. The agreement should clearly outline the procedures for the transfer of shares, including any necessary valuation methods, the timing of the transfer, and any restrictions or conditions on the transfer. In conclusion, an Illinois Buy-Sell Agreement between two shareholders of a closely held corporation serves as a vital tool to ensure a smooth transition of ownership in the event of trigger events. It facilitates business succession planning and provides a mechanism for shareholders to buy or sell their stock while maintaining the stability and continuity of the corporation.

Illinois Buy-Sell Agreement between Two Shareholders of Closely Held Corporation Keywords: buy-sell agreement, Illinois, shareholders, closely held corporation, stock transfer, business succession, cross-purchase agreement, redemption agreement, trigger events. Description: A Buy-Sell Agreement is a legal document commonly used by shareholders of closely held corporations to govern the transfer of shares in the event of certain trigger events. In the state of Illinois, such an agreement provides a framework for the orderly transfer of stock between two shareholders or more. In the case of a Buy-Sell Agreement between two shareholders of a closely held corporation in Illinois, there are typically two main types: the Cross-Purchase Agreement and the Redemption Agreement. 1. Cross-Purchase Agreement: This type of agreement allows the remaining shareholder(s) to purchase the shares of a departing shareholder. In this scenario, each shareholder agrees to buy a proportionate amount of the departing shareholder's stock. For example, if one shareholder decides to leave the corporation, the remaining shareholder(s) will purchase their shares in proportion to their ownership percentage. The purchase price is usually predetermined or can be based on a mutually agreed-upon valuation method. This agreement is beneficial when there are only a few shareholders involved. 2. Redemption Agreement: In this type of agreement, the corporation itself agrees to purchase the shares of a departing shareholder. The corporation will redeem the shares using its own funds or through an agreed-upon payment plan. This option is more commonly used when there are multiple shareholders involved, and it simplifies the process by allowing the corporation to buy back the shares from the departing shareholder. The Illinois Buy-Sell Agreement between two shareholders of a closely held corporation should also include specific trigger events, or situations in which the agreement is activated. These trigger events may include the death of a shareholder, disability, retirement, bankruptcy, divorce, or other predefined circumstances. The agreement should clearly outline the procedures for the transfer of shares, including any necessary valuation methods, the timing of the transfer, and any restrictions or conditions on the transfer. In conclusion, an Illinois Buy-Sell Agreement between two shareholders of a closely held corporation serves as a vital tool to ensure a smooth transition of ownership in the event of trigger events. It facilitates business succession planning and provides a mechanism for shareholders to buy or sell their stock while maintaining the stability and continuity of the corporation.