March 1, 2012

Ms. Kelly Klient
111 First Street
Cityville, Texas 77777

Dear Kelly:

It is important that businesses with more than one owner (such as your business) have a written buy/sell agreement specifying what happens when an owner withdraws from the business. A buy/sell agreement is a contract between the owners (or the owners and the business entity itself) that establishes rules and restrictions applicable to changes in ownership.

The typical buy/sell agreement provides that an owner's interest in the business will be sold (or at least offered for sale) at a specified price to the other owners and/or to the business entity itself upon the occurrence of specified events. This prevents unwanted persons from becoming members of the ownership group and ensures a ready market for closely held ownership interests. It also provides liquidity to a deceased owner's family and assures the remaining owners that they will be able to continue the business without interference from the family of the deceased owner. Buy/sell agreements also offer estate planning benefits by establishing a value for the business prior to an owner's death.

Common methods for determining the purchase price under a buy/sell agreement include (1) establishing a fixed price in the contract, (2) requiring an independent appraisal, or (3) specifying a formula such as a percentage of book value. Events that trigger a buy/sell agreement are specified by the owners in the contract. Generally, buy/sell agreements are triggered by any circumstance that might cause an owner to dispose of an ownership interest--such as death, disability, bankruptcy, or retirement.

The best time to establish a buy/sell agreement is now, before a problem develops. If you currently do not have a buy/sell agreement for your business, I would be happy to discuss their merits with you and help you and your attorney in formulating the terms of the agreement. If you already have a buy/sell agreement in place, I suggest that we review it together to ensure that it is current and includes appropriate provisions to protect you in the event of an ownership change. Please call me at your convenience so we can discuss this matter further.

Best Regards,

(Practitioner or client contact person)