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 Wake North Carolina Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legal document that outlines various provisions and guidelines related to the buying and selling of shares within the corporation. This agreement is specifically tailored to meet the needs and requirements of closely held corporations operating in Wake, North Carolina. The primary purpose of a Buy-Sell Agreement is to regulate the transfer of shares amongst shareholders, ensuring a smooth transition while safeguarding the interests of both the corporation and its shareholders. Typically, such agreements are put in place to address potential scenarios like death, disability, retirement, divorce, or voluntary departure of a shareholder. Here are a few key components commonly found in a Wake North Carolina Buy-Sell Agreement: 1. Valuation Method: The agreement specifies the method to determine the fair market value of shares, such as using an independent appraiser or a predetermined formula based on financial statements. 2. Right of First Refusal: This provision grants existing shareholders the option to purchase shares being sold by a departing shareholder before they are offered to external parties, ensuring the corporation's ownership remains within the existing group. 3. Mandatory Purchase: In certain situations, such as a shareholder's death or disability, the agreement may require the corporation or other shareholders to buy the shares from the departing shareholder. 4. Trigger Events: The agreement identifies specific events (e.g., retirement, resignation, termination) that trigger the buy-sell provisions, outlining the procedures and timeline for executing the sale or purchase of shares. 5. Payment Terms: The agreement details the payment terms, whether through a lump-sum payment, installment plans, or utilizing life insurance or financing arrangements to facilitate the transaction. 6. Non-Compete and Non-Disclosure: To protect the corporation's interests, a Buy-Sell Agreement often includes provisions restricting departing shareholders from competing directly with the corporation and disclosing confidential information. Types of Wake North Carolina Buy-Sell Agreements between Shareholders of Closely Held Corporations: 1. Cross-Purchase Agreement: Under this type of agreement, each shareholder agrees to purchase the shares of a departing shareholder in proportion to their current ownership percentage. 2. Stock Redemption Agreement: In this arrangement, the corporation itself will buy back the shares from the departing shareholder, effectively canceling or distributing them amongst the remaining shareholders. 3. Hybrid Agreement: A combination of the cross-purchase and stock redemption agreements, the hybrid agreement allows both the shareholders and the corporation to participate in purchasing shares. In Wake, North Carolina, closely held corporations can customize their Buy-Sell Agreements to align with state-specific laws and regulations. It is crucial for all shareholders to consult with legal and financial professionals to draft a comprehensive agreement that meets the unique needs and goals of their corporation.
A Wake North Carolina Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legal document that outlines various provisions and guidelines related to the buying and selling of shares within the corporation. This agreement is specifically tailored to meet the needs and requirements of closely held corporations operating in Wake, North Carolina. The primary purpose of a Buy-Sell Agreement is to regulate the transfer of shares amongst shareholders, ensuring a smooth transition while safeguarding the interests of both the corporation and its shareholders. Typically, such agreements are put in place to address potential scenarios like death, disability, retirement, divorce, or voluntary departure of a shareholder. Here are a few key components commonly found in a Wake North Carolina Buy-Sell Agreement: 1. Valuation Method: The agreement specifies the method to determine the fair market value of shares, such as using an independent appraiser or a predetermined formula based on financial statements. 2. Right of First Refusal: This provision grants existing shareholders the option to purchase shares being sold by a departing shareholder before they are offered to external parties, ensuring the corporation's ownership remains within the existing group. 3. Mandatory Purchase: In certain situations, such as a shareholder's death or disability, the agreement may require the corporation or other shareholders to buy the shares from the departing shareholder. 4. Trigger Events: The agreement identifies specific events (e.g., retirement, resignation, termination) that trigger the buy-sell provisions, outlining the procedures and timeline for executing the sale or purchase of shares. 5. Payment Terms: The agreement details the payment terms, whether through a lump-sum payment, installment plans, or utilizing life insurance or financing arrangements to facilitate the transaction. 6. Non-Compete and Non-Disclosure: To protect the corporation's interests, a Buy-Sell Agreement often includes provisions restricting departing shareholders from competing directly with the corporation and disclosing confidential information. Types of Wake North Carolina Buy-Sell Agreements between Shareholders of Closely Held Corporations: 1. Cross-Purchase Agreement: Under this type of agreement, each shareholder agrees to purchase the shares of a departing shareholder in proportion to their current ownership percentage. 2. Stock Redemption Agreement: In this arrangement, the corporation itself will buy back the shares from the departing shareholder, effectively canceling or distributing them amongst the remaining shareholders. 3. Hybrid Agreement: A combination of the cross-purchase and stock redemption agreements, the hybrid agreement allows both the shareholders and the corporation to participate in purchasing shares. In Wake, North Carolina, closely held corporations can customize their Buy-Sell Agreements to align with state-specific laws and regulations. It is crucial for all shareholders to consult with legal and financial professionals to draft a comprehensive agreement that meets the unique needs and goals of their corporation.