Los Angeles California Buy-Sell Agreement between Two Shareholders of Closely Held Corporation

• Category: Corporations - Contracts
• State: Multi-State
• County: Los Angeles
• 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. Los Angeles California Buy-Sell Agreement between Two Shareholders of Closely Held Corporation: A buy-sell agreement is a legally binding contract between two shareholders of a closely held corporation that outlines the terms and conditions for buying or selling shares in the event of certain triggering events. In Los Angeles, California, where the business environment is vibrant and diverse, it is crucial for shareholders to have a well-drafted buy-sell agreement to protect their investments and outline an effective exit strategy if necessary. Keywords: Los Angeles, California, buy-sell agreement, two shareholders, closely held corporation. Types of Los Angeles California Buy-Sell Agreement between Two Shareholders: 1. Cross-Purchase Agreement: In this type of buy-sell agreement, two shareholders agree to buy each other's shares in the event of a triggering event, such as death, disability, retirement, or voluntary exit. The agreement specifies the terms, valuation methods, and funding mechanisms for the purchase, such as using personal funds or insurance policies. 2. Redemption Agreement: This buy-sell agreement type allows the corporation itself to purchase the shares of a departing shareholder. The agreement details the circumstances triggering the buyout, valuation methods, funding sources, and mechanisms of the redemption. It is important for shareholders to consider tax implications and source of funds when opting for a redemption agreement. 3. Hybrid Agreement: This type of buy-sell agreement combines elements of both a cross-purchase and redemption agreement. It allows flexibility by giving shareholders the option to sell their shares to other remaining shareholders, as well as to the corporation itself. 4. Wait-and-See Agreement: In certain situations, shareholders may choose to delay making decisions about the buyout until a specified event occurs, such as a triggering event. This type of agreement provides flexibility and allows parties to assess the situation before committing to the buyout. 5. Call Option Agreement: In a call option agreement, one shareholder has the right, but not the obligation, to purchase the shares of the other shareholder based on predetermined terms and conditions. This agreement provides one shareholder with the opportunity to buy the shares at a specific price, which can be beneficial in cases of disputes or partial sales. When drafting a Los Angeles California Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation, it is essential to consult with a qualified attorney experienced in corporate law and buy-sell agreements in order to customize the agreement to the specific needs of the shareholders and comply with California and federal laws. By having a comprehensive and well-executed buy-sell agreement, shareholders can protect their investments and ensure a smooth transition in the event of unforeseen circumstances.

Los Angeles California Buy-Sell Agreement between Two Shareholders of Closely Held Corporation: A buy-sell agreement is a legally binding contract between two shareholders of a closely held corporation that outlines the terms and conditions for buying or selling shares in the event of certain triggering events. In Los Angeles, California, where the business environment is vibrant and diverse, it is crucial for shareholders to have a well-drafted buy-sell agreement to protect their investments and outline an effective exit strategy if necessary. Keywords: Los Angeles, California, buy-sell agreement, two shareholders, closely held corporation. Types of Los Angeles California Buy-Sell Agreement between Two Shareholders: 1. Cross-Purchase Agreement: In this type of buy-sell agreement, two shareholders agree to buy each other's shares in the event of a triggering event, such as death, disability, retirement, or voluntary exit. The agreement specifies the terms, valuation methods, and funding mechanisms for the purchase, such as using personal funds or insurance policies. 2. Redemption Agreement: This buy-sell agreement type allows the corporation itself to purchase the shares of a departing shareholder. The agreement details the circumstances triggering the buyout, valuation methods, funding sources, and mechanisms of the redemption. It is important for shareholders to consider tax implications and source of funds when opting for a redemption agreement. 3. Hybrid Agreement: This type of buy-sell agreement combines elements of both a cross-purchase and redemption agreement. It allows flexibility by giving shareholders the option to sell their shares to other remaining shareholders, as well as to the corporation itself. 4. Wait-and-See Agreement: In certain situations, shareholders may choose to delay making decisions about the buyout until a specified event occurs, such as a triggering event. This type of agreement provides flexibility and allows parties to assess the situation before committing to the buyout. 5. Call Option Agreement: In a call option agreement, one shareholder has the right, but not the obligation, to purchase the shares of the other shareholder based on predetermined terms and conditions. This agreement provides one shareholder with the opportunity to buy the shares at a specific price, which can be beneficial in cases of disputes or partial sales. When drafting a Los Angeles California Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation, it is essential to consult with a qualified attorney experienced in corporate law and buy-sell agreements in order to customize the agreement to the specific needs of the shareholders and comply with California and federal laws. By having a comprehensive and well-executed buy-sell agreement, shareholders can protect their investments and ensure a smooth transition in the event of unforeseen circumstances.