San Diego California Buy-Sell Agreement between Shareholders of Closely Held Corporation

• Category: Corporations - Buy Sell
• State: Multi-State
• County: San Diego
• Control #: US-02462BG
• Format: Word; PDF; 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. A San Diego California Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legal document that outlines the terms and conditions under which shareholders can buy or sell their shares in the corporation. This agreement is crucial for closely held corporations as it helps maintain control and ownership of the corporation within a specific group of individuals. Keywords: San Diego California, Buy-Sell Agreement, Shareholders, Closely Held Corporation There are two main types of Buy-Sell Agreements commonly found in San Diego, California: 1. Cross-Purchase Buy-Sell Agreement: In this type, each shareholder enters into an agreement with every other shareholder. The agreement grants the right and obligation to purchase a departing shareholder's shares to the remaining shareholders. In case of a shareholder's death, the surviving shareholders can buy the deceased shareholder's shares from their estate. 2. Stock Redemption Buy-Sell Agreement: In this type, the corporation itself agrees to purchase the shares of a shareholder upon certain triggering events. The corporation purchases the shares using its own funds or through a loan, reducing the number of shareholders and increasing its ownership in the process. A San Diego California Buy-Sell Agreement between Shareholders of a Closely Held Corporation typically includes the following key elements: 1. Valuation Method: The agreement specifies how the shares will be valued when a shareholder wants to sell or in case of an event triggering a buyout, such as death or disability. Methods commonly used include appraisals, formula-based calculations, or independent third-party valuations. 2. Triggering Events: The agreement defines the specific events that would trigger a shareholder's right or obligation to sell their shares, such as death, disability, retirement, bankruptcy, divorce, or voluntary departure. 3. Purchase Price: The agreement outlines how the purchase price for the shares will be determined, whether it will be a fixed price, book value, a formula, or based on an independent appraisal. 4. Funding Source: The agreement specifies the funding source for the purchase of shares, including cash reserves, corporate borrowing, insurance policies, or installment payments. 5. Restrictions on Transfer: The agreement can include provisions that restrict shareholders from selling or transferring their shares outside the agreement, ensuring that the shares are offered first to existing shareholders. 6. Dispute Resolution: The agreement may include a clause specifying how any disputes related to the agreement will be resolved, such as through arbitration or mediation. By implementing a San Diego California Buy-Sell Agreement between Shareholders of a Closely Held Corporation, the corporation and its shareholders can ensure a smooth transition in case of unexpected events, maintain control over ownership, and protect the value of the corporation.

A San Diego California Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legal document that outlines the terms and conditions under which shareholders can buy or sell their shares in the corporation. This agreement is crucial for closely held corporations as it helps maintain control and ownership of the corporation within a specific group of individuals. Keywords: San Diego California, Buy-Sell Agreement, Shareholders, Closely Held Corporation There are two main types of Buy-Sell Agreements commonly found in San Diego, California: 1. Cross-Purchase Buy-Sell Agreement: In this type, each shareholder enters into an agreement with every other shareholder. The agreement grants the right and obligation to purchase a departing shareholder's shares to the remaining shareholders. In case of a shareholder's death, the surviving shareholders can buy the deceased shareholder's shares from their estate. 2. Stock Redemption Buy-Sell Agreement: In this type, the corporation itself agrees to purchase the shares of a shareholder upon certain triggering events. The corporation purchases the shares using its own funds or through a loan, reducing the number of shareholders and increasing its ownership in the process. A San Diego California Buy-Sell Agreement between Shareholders of a Closely Held Corporation typically includes the following key elements: 1. Valuation Method: The agreement specifies how the shares will be valued when a shareholder wants to sell or in case of an event triggering a buyout, such as death or disability. Methods commonly used include appraisals, formula-based calculations, or independent third-party valuations. 2. Triggering Events: The agreement defines the specific events that would trigger a shareholder's right or obligation to sell their shares, such as death, disability, retirement, bankruptcy, divorce, or voluntary departure. 3. Purchase Price: The agreement outlines how the purchase price for the shares will be determined, whether it will be a fixed price, book value, a formula, or based on an independent appraisal. 4. Funding Source: The agreement specifies the funding source for the purchase of shares, including cash reserves, corporate borrowing, insurance policies, or installment payments. 5. Restrictions on Transfer: The agreement can include provisions that restrict shareholders from selling or transferring their shares outside the agreement, ensuring that the shares are offered first to existing shareholders. 6. Dispute Resolution: The agreement may include a clause specifying how any disputes related to the agreement will be resolved, such as through arbitration or mediation. By implementing a San Diego California Buy-Sell Agreement between Shareholders of a Closely Held Corporation, the corporation and its shareholders can ensure a smooth transition in case of unexpected events, maintain control over ownership, and protect the value of the corporation.