The Death of a Business Owner: The Importance of Buy-Sell Agreements
Hypothetical: Betty and her sister Amy are equal owners of Betty’s Things, Inc. They have been in business for 10 years, and their business is going well despite the fact that Amy’s husband does not like Betty. Amy’s husband does not like Betty because he believes that his wife was entitled to more money from the business than Amy has received. Amy unexpectedly dies in a car accident. Betty contacts an attorney because Amy’s husband called her demanding that the business is dissolved and that Amy’s estate receives two-thirds of the business assets. To add insult, Betty’s Things, Inc. is sued by the other driver involved in the car accident.
In meeting with the attorney, Betty is shocked to hear that Betty’s Things, Inc. had been administratively dissolved by the Secretary of State’s Office five years ago because the business failed to submit its annual renewal fee. In addition, Betty is distraught when she finds out that most likely the corporation lacks a corporate veil because the business was dissolved and furthermore while the corporation filed its Articles of Incorporation with the Secretary of State’s Office, it did not do anything else regarding corporate records. As a result, there are no records of corporate minutes, which neither Betty nor Amy thought were important because they weren’t a Fortune 500 company and therefore, they believed they weren’t a true corporation that had to do something formal like have corporate minutes. The significance of not having a corporate veil Betty finds out is that hers and her sister’s estate’s personal assets are most likely going to be available to creditors in the event that insurance does not cover any judgment in the lawsuit involving the car accident. While all of those items stress Betty out, she is most stressed when she is told that because there was not a buy-sell agreement between her and Amy, the new owner of the business is her brother-in-law who despises her. Betty is distraught when she realizes that these issues could have most likely been avoided if the business had hired an attorney to assist them and advise them.
Spangler and de Stefano, PLLP can assist you with drafting and implementing a buy-sell agreement, maintaining corporate records and other legal needs for your business. Please contact us for a free one-half consultation.
The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.