Buy-Sell Agreement Health Check
A buy-sell agreement is one of the most important legal documents for any business with multiple owners. This assessment will help you identify potential gaps in your agreement's structure, funding, coverage, and tax efficiency.
1
Valuation
2
Funding
3
Triggers
4
Tax
5
Readiness
Valuation Adequacy
How is the buyout price determined and kept current?
What pricing mechanism does your agreement use?
When was the price or valuation last updated?
Does the agreement include a fallback to a formal valuation process if there's a dispute or stale result?
Funding Sufficiency
Is the buyout actually fundable when triggered?
How is the buyout funded?
If life insurance is used, has coverage been reviewed against current business value in the last 2 years?
Does the agreement clearly specify payment terms (down payment, interest rate, amortization) for non-death triggering events?
Trigger Coverage
What triggering events does the agreement address?
Which triggering events does your agreement cover? (Select all that apply)
Does the agreement require each owner's spouse to sign a consent or joinder?
Does the agreement address voting rights and distributions between the triggering event and completed purchase?
Tax Efficiency
Is the agreement structured for tax efficiency?
How is your agreement structured?
Do you understand the basis consequences of your agreement's structure?
If you're a partnership or LLC, does the agreement address §754 elections and §736 payment classification?
Operational Readiness
Is the agreement current and executable?
When was the agreement last reviewed by legal counsel?
Has the agreement been updated to reflect changes in ownership, new owners, or departed owners?
Does the agreement address maintenance of S corporation or partnership tax status after a triggering event?
Overall Assessment
—
Key Findings & Red Flags
Next Steps
Based on your assessment results, a comprehensive review by your legal team is recommended to address any gaps or risks identified above.
Disclaimer:
This tool is for informational purposes only and does not constitute legal or tax advice. The application of buy-sell agreement structures, Section 302 redemption rules, and Sections 736, 741, 743(b), and 754 depends on individual facts and circumstances. Consult a qualified tax attorney or CPA before making decisions based on this information. Circular 230 Notice:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.