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.
Los Angeles California Buy-Sell Agreement between Shareholders of Closely Held Corporation: A buy-sell agreement is a legally binding contract established between shareholders of a closely held corporation in Los Angeles, California. This agreement outlines the terms and conditions for the sale and purchase of shares in the event of certain triggering events such as death, disability, retirement, divorce, or voluntary exit of a shareholder. In Los Angeles, California, there are different types of buy-sell agreements tailored to suit the specific needs and circumstances of closely held corporations. Some common types include: 1. Cross-Purchase Agreement: In this type of agreement, each individual shareholder agrees to purchase the shares of an exiting or deceased shareholder. This ensures continuity of ownership within the corporation and prevents unwanted parties from becoming shareholders. 2. Stock Redemption Agreement: In a stock redemption agreement, the corporation itself agrees to repurchase the shares of an exiting or deceased shareholder. The corporation obtains life insurance policies on the lives of the shareholders, and in the event of a triggering event, it uses the insurance proceeds to buy back the shares. 3. Hybrid Agreement: This type of agreement combines elements of both cross-purchase and stock redemption agreements. It allows shareholders to choose whether they want to buy the shares personally or have the corporation redeem them. Key provisions typically included in Los Angeles California Buy-Sell Agreements between Shareholders of Closely Held Corporations are: 1. Purchase Price: The agreement specifies how the purchase price for the shares will be determined. This can be done through a pre-determined formula, independent appraisal, or fair market value. 2. Triggering Events: The events that can trigger the buy-sell agreement, such as death, disability, retirement, divorce, or voluntary exit, are clearly defined. This ensures that shareholders have a clear understanding of when the agreement will come into effect. 3. Funding Mechanisms: The agreement identifies the funding mechanisms to facilitate the purchase of shares, which can include life insurance policies, loans, or existing capital reserves of the corporation. 4. Restrictions on Transfer: The agreement may include provisions that restrict the transfer of shares to outside parties without the consent of existing shareholders. This helps maintain the integrity and control of the corporation within the group of shareholders. 5. Dispute Resolution: In case of any disputes arising from the buy-sell agreement, the agreement should outline the methods of dispute resolution, such as mediation, arbitration, or litigation. 6. Termination and Amendment: The agreement may include provisions allowing for the termination or amendment of the agreement with the consent of all shareholders or under certain specified circumstances. Creating a comprehensive Los Angeles California Buy-Sell Agreement between Shareholders of Closely Held Corporation is crucial for closely held corporations to protect the interests of shareholders and ensure a smooth transition of ownership in the event of triggering events. Seeking legal counsel from qualified professionals is highly recommended drafting and customize the agreement to suit the unique needs of the corporation and its shareholders.
Los Angeles California Buy-Sell Agreement between Shareholders of Closely Held Corporation: A buy-sell agreement is a legally binding contract established between shareholders of a closely held corporation in Los Angeles, California. This agreement outlines the terms and conditions for the sale and purchase of shares in the event of certain triggering events such as death, disability, retirement, divorce, or voluntary exit of a shareholder. In Los Angeles, California, there are different types of buy-sell agreements tailored to suit the specific needs and circumstances of closely held corporations. Some common types include: 1. Cross-Purchase Agreement: In this type of agreement, each individual shareholder agrees to purchase the shares of an exiting or deceased shareholder. This ensures continuity of ownership within the corporation and prevents unwanted parties from becoming shareholders. 2. Stock Redemption Agreement: In a stock redemption agreement, the corporation itself agrees to repurchase the shares of an exiting or deceased shareholder. The corporation obtains life insurance policies on the lives of the shareholders, and in the event of a triggering event, it uses the insurance proceeds to buy back the shares. 3. Hybrid Agreement: This type of agreement combines elements of both cross-purchase and stock redemption agreements. It allows shareholders to choose whether they want to buy the shares personally or have the corporation redeem them. Key provisions typically included in Los Angeles California Buy-Sell Agreements between Shareholders of Closely Held Corporations are: 1. Purchase Price: The agreement specifies how the purchase price for the shares will be determined. This can be done through a pre-determined formula, independent appraisal, or fair market value. 2. Triggering Events: The events that can trigger the buy-sell agreement, such as death, disability, retirement, divorce, or voluntary exit, are clearly defined. This ensures that shareholders have a clear understanding of when the agreement will come into effect. 3. Funding Mechanisms: The agreement identifies the funding mechanisms to facilitate the purchase of shares, which can include life insurance policies, loans, or existing capital reserves of the corporation. 4. Restrictions on Transfer: The agreement may include provisions that restrict the transfer of shares to outside parties without the consent of existing shareholders. This helps maintain the integrity and control of the corporation within the group of shareholders. 5. Dispute Resolution: In case of any disputes arising from the buy-sell agreement, the agreement should outline the methods of dispute resolution, such as mediation, arbitration, or litigation. 6. Termination and Amendment: The agreement may include provisions allowing for the termination or amendment of the agreement with the consent of all shareholders or under certain specified circumstances. Creating a comprehensive Los Angeles California Buy-Sell Agreement between Shareholders of Closely Held Corporation is crucial for closely held corporations to protect the interests of shareholders and ensure a smooth transition of ownership in the event of triggering events. Seeking legal counsel from qualified professionals is highly recommended drafting and customize the agreement to suit the unique needs of the corporation and its shareholders.