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a) The owner of a sole proprietorship can ensure the continuation of her business following her death by entering into a buy-sell agreement with an individual who agrees to purchase the business from the owner’s estate.
a) Partners offer plan for the continuation of the business after the death of a partner by
entering into a buy-sell agreement that sets out the terms under which a deceased partner’s
interest in the partnership will be purchased.
b) The purchase of a deceased partner’s share can be accomplished by one of two methods.
i. Cross-Purchase Method: When this method is used, each partner agrees to purchase a
proportionate share of a deceased partner’s interest in the partnership.
ii. Entity Method: Under this method of buy-sell agreements, the partnership rather than the
individual partners – agrees to purchase the share of any partner who dies; the partnership also
agrees to distribute a proportionate share of that ownership interest to each of the surviving
partners.
a) The owners of a closely held corporation often enter into a buy-sell agreement, which is
similar to partnership buy-sell agreement just described.
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