What is Buy-Sell Agreement?

February 2, 2013


Business partners need a buy-sell agreement or buyout agreement when they form a business or immediately after. It is an agreement which protects the interest of each party whenever there is an event which would change ownership. The agreement would set the price and the conditions upon which the mandatory or optional buyout would take place. Whenever this process is delayed, the business owners increase their financial risk.

The goals of the buy sell agreement would be:

· the identification of the events which would trigger the purchase of the business and to ensure that the business owners’ interest would be protected,

· to identify the buyer of the owner’s interest in the business, i.e., the company, the remaining owner, or joint ownership of the owner and the business,

· to provide a procedure for determining purchase price of the business, according to market conditions when the event occurs,

· to provide a way of funding the agreement, such as through life insurance

· to determine the deceased owner’ interest in the business for estate tax purposes

There are several events which would trigger the optional buyout of an owner’s interest in the business. They include death or disability of an owner, the decision to transfer ownership to a third party, the retirement of an owner, divorce of an owner, or bankruptcy of the business. In the event of death or disability, the business owner’s family would be protected, since the business owner supported the family with his share of the proceeds of the business. If the decision to create a buy sell agreement is delayed, it places the family at risk for financial hardship. Conversely, divorce or bankruptcy would make the business vulnerable to outsiders, such as a spouse or a creditor. Creating a buy-sell agreement would prevent these outsiders from taking over the business.


Marketing Mistakes

July 22, 2011




Although many retailers are moving their operations across the seas, they can still avail themselves of the opportunities to market their businesses on-line. Shoppers have become more sophisticated and willing to shop on the Internet, now that more safety measures are in place. Many of the on-line shopping carts are encrypted, making them less vulnerable to identity theft.

Read more: Marketing Mistakes.

Avoiding Use of Taxpayer Money; No More Bailed Out Firms

April 15, 2011

Avoiding Use of Taxpayer money

The Obama administration has formed the The Dodd – Frank Wall Street Forum which now determines how they can safely liquidate firms instead of turning to the taxpayers to bailout these failed companies. (Click onto the tile of the article to read more about this…)

CIT to File for bankruptcy

November 3, 2009


Photo by lprole

CIT has been unable to convince bondholders to finance more of their debt. This coupled with the fact that investors would lose money on the a pre-packaged bankruptcy, including the U.S., has caused the company to seek bankruptcy protection. The U. S. stands to lose $2.3 billion and opted not to supply more funds.

The only investor which seems to gain anything from this is Goldman Sachs, who will keep open its $2.3 billion loan in spite of the bankruptcy filing. CIT received a $4.5 billion dollar loan which will keep the company going during the bankruptcy proceedings and will not put the retailers at risk during the holiday season. CIT expects to emerge from this filing in a stronger position.

Many retailers have either gone out of business or cut back on their current operations as a result of the problems which CIT has had during the economic crisis. Retailers have depended on their support for factoring loans to purchase inventory. Many retailers, as a result are relying on their own money to keep their businesses open.

CIT Working to Strengthen Management

August 14, 2009

Photo by Lisa Gagne

Photo by Lisa Gagne

As CIT was forced to pledge most of its assets to secure a $1 billion dollar note, the company has also agreed to “strengthen its management and risk oversight, submit a plan to raise capital and fix its loan loss accounting,” reported Colin Barr, Senior Writer for Fortune in his August 13, 2009 article.

This means CIT must review the salaries of top executives to insure that their high salaries are not causing the company’s financial failure. Colin Barr also note that CEO Jeff Peek “who has made $36 million since 2004 for leading the company to the brink of bankruptcy” signed the agreement with the FDIC.

In view of the securing of financing for CIT, there are still questions as to whether CIT will be able to continue, considering the fact that CIT has made its money by “borrowing money at low rates and lending it out at higher rates.”

Retailers now have money for Christmas inventory, but some of the retailers who need this money are at risk of bankruptcy, themselves.

Bankruptcy Still Possible for CIT Bank

August 12, 2009

Photo by Mario Hornik

Photo by Mario Hornik

Although CIT bondholders will not push for bankruptcy, it is still possible for CIT Bank who is looking for the final $1 billion dollars by August 17, 2009 in order to pay a note that is due.

CIT is looking for ninety percent of the money in order to avoid the filing. This is a very tense situation for retailers who need factoring loans from CIT in order to buy Christmas inventory. If they do not get the loans or look for alternative financing, they may go out of business.

CIT is trying to restructure the company by selling off some of its assets. Restructuring has become a popular way for businesses to avoid bankruptcy in the economic crisis in the U. S., since refinancing is unavailable.

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CIT Considering Selling Assets

July 29, 2009

ist2_7461061-credit-crunchWhile CIT is waiting for the remaining $1 billion dollars from its bondholders, it is now considering selling off some of its assets and bankruptcy is still a possibility. At present CIT is trying to restructure out of court. They were denied additional bailout money by the Obama administration because they could not restructure.

CIT’s corporate finance department is its largest division and in all likelihood, they will keep this division. CIT has noted that it may be difficult to make money on the aviation and railcar business. Microsoft had terminated its relationship with CIT for vendor financing, and CIT is unsure about whether they will keep this division.

There has been some interest in purchasing the bank as Warren Buffet’s company, Berkshire Hathaway and Leucadia National had offered to buy CIT in the spring, but CIT turned down the offer which was too low.

Whether or not CIT is able to restructure now in order to receive the additional $1 billion remains to be seen. However, the bondholders stand to lose money if their efforts to provide the additional financing fail because CIT fails to restructure. It would appear that the bondholders will do what they can to help CIT to protect their investment.