By Thomas J. Perrone, CLU, CIC
A Buy and Sell Agreement for an S Corporation needs special designs.
Key Point on Redemption of S Corporation
- Special tax needs
- Financial security
- Triggers that transfer the S corporation
- Conflicts
Also, a proper buy and sell agreement can do the following:
- Avoid a fire sale
- Create stability for employees and creditor/vendors
- Avoid termination of the S corporation status
- Avoid costly litigation
- Create a market
This video explains why a proper BSA is needed. It covers many areas when the company has selected S corporation status.
Summary
A properly designed buy and sell agreement (BSA) is essential for S Corporations due to unique tax concerns. It is important for financial security. Triggering events can transfer ownership and cause potential conflicts. Such an agreement helps prevent fire sales. It ensures stability for employees and creditors. It also protects S Corporation status. Additionally, it avoids costly legal disputes and creates a market for shares. The document highlights the importance of addressing these areas to keep smooth business operations.
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