Choosing a Funding Method for
Your Buy-Sell Agreement
who owns a closely held business with at least one other
partner needs to take certain steps to guard against business
If one partner departs suddenly,
or becomes disabled or dies, serious confusion and conflicts
can ensue. Among the most important steps is to create a
buy-sell agreement, which stipulates precisely how ownership
interests will be valued and purchased.
Ways to Pay
In most situations, payouts for a buy-sell agreement are
funded with a cash-value life insurance policy or a disability
buyout insurance policy. There are two main types of life
insurance-funded buy-sell agreements:
Cross-purchase agreement. Partners buy insurance
policies on each other, using the proceeds to buy a deceased
or disabled partner's ownership shares. They receive a step-up
in cost basis that may reduce taxes if the business is later
sold. This option is usually preferable if there are three or
fewer business partners.
Entity purchase agreement. The business entity buys
insurance policies on each partner and uses the proceeds to
buy a deceased or disabled owner's shares, which are divided
among surviving partners. Partners receive no step-up in cost
basis with this type of agreement. This option is usually
preferable if there are four or more partners, because it
eliminates the need for each partner to buy so many insurance
It's usually wise to hire a professional business appraiser to
perform a business valuation when drafting a buy-sell
agreement. The valuation should then be updated periodically
as circumstances that could potentially affect the value of
the company change. In fact, the buy-sell agreement itself
should be reviewed by all of the partners from time to time to
make sure it still reflects each partner's intentions.
Creating a buy-sell agreement is an important step in the
growth and preservation of every business. For help creating
or reviewing yours, please call us. Call us at
SMEED CPA Adds Financial
Services To Help Clients With
Investments & Insurance
often we here at SMEED CPA are asked about financial issues
that impact our clients investments and their portfolios.
We always offered our opinion and suggestions but in order to
help our clients actually execute the changes we suggest,
SMEED has created a Financial Services division.
SMEED Financial Services, Inc. will be able to
work with both individual and business clients on their
investment portfolios and manage assets on their behalf.
SMEED Financial will include Michael Uadiale,
ACA, CPA, CGMA; and Pablo Blanco who has
recently joined SMEED and comes with over 18 years of
financial sales and advising experience with affluent
Watch your inbox and mail boxes for more specific information
on services SMEED Financial Services, Inc will make available
Would You Give Me Your
Feedback & Testimonial
on Our Hotline?
Hello it’s Michael Uadiale, CPA of
SMEED CPA Inc. We’ve just installed a toll-free
number that I would like for you to call and tell me how you
think we are doing as your CPA firm.
Just dial 800-609-9006
extension 3638 and follow the instructions. If we’ve
done a good job please let me know. And if we can
improve on anything, please mention that too.
Us Be Found on
Also as we expand our business,
we find more and more people are using
YELP and Google
to look for us by searching Brentwood accountant or
When they do this we want to
be FOUND on GOOGLE. One way you can help us
is to give us an
ONLINE REVIEW on our Google Maps/Places listing --->
or on our YELP local listing
click here to go to our Google Listing for SMEED CPA and
click on the
YELP link to go there.
Scroll down to the Review area.
On either site it may say: Been here?
Rate and review
You will click on the Rate and
review link and then log in, then
give us a review!
You can choose between 1 and 5
STARS and write in what you think about the tax or accounting
work we have done for you.
It's that simple. Thank
you in advance for your help and cooperation!
As always you can call our offices if you have any
questions about these or any other accounting related issues, at
Regards, Michael Uadiale, CPA,
Managing Partner, SMEED CPA,