When a triggering event occurs, the purchase/sale agreement offers the company or other owners certain requirements or options (for example. B a mandatory obligation to purchase the interests of the selling owner or a right of pre-emption), depending on the customer`s objectives. In a way, it defines an exit strategy for owners at the beginning of the entity, which will reduce the risk of conflict later when a triggering event occurs. While a buy-sell agreement is useful for all small businesses, it is especially important for LLCs with more than one owner. This prevents the dissolution of the CLL if a member takes into account the rights of the member and his or her family. For an individual entrepreneur, a purchase-sale contract can arrange for a takeover by an employee or family member if the original owner retires or dies. As a general rule, when the owners and/or the company are unwilling or unable to make the purchase, as the case may be, the purchase-sale agreement provides that the outgoing owner is free to sell his shares to a foreigner. In addition, the purchase-sale contract may provide that, in certain cases (e.g. B voluntary revocation), interest is valued at a lower amount (e.g. Β book value).
In addition, the purchase-sale contract may provide that interest is purchased in tranches over a fixed period (e.g.B. five or ten years). Each of these options can make it more convenient to buy the interest. The general rule does not apply when certain conditions are met. Careful compliance with these requirements makes it possible to use the purchase/sale agreement to determine the value of the narrow activity for transfer tax purposes. The general rule does not apply to options, agreements, rights or restrictions that meet all of the following requirements (§2703(b)): 3. Cross-purchase agreements for companies raise the issue of transfer of value when a remaining shareholder acquires a policy from a deceased shareholder over the life of a third shareholder. In most cases, receipt of life insurance proceeds is not a taxable event.  However, when life insurance is transferred for consideration, the net proceeds of the sale are considered ordinary income upon receipt.  Buying a deceased shareholder`s interest in a policy on the life of a third shareholder could therefore trigger income tax if that policy pays off.
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