When Bob Gross, co-owner of a local jewelry store, dropped dead of a heart attack this past July, his business died with him. Sure, it took a while, several months, in fact, for the store to succumb, but succumb it did.
A buy-sell agreement, and the means to fund it, would have saved the business, and its employees would not now – at the height of the Christmas season – be looking for jobs instead of gifts.
Such an arrangement would also have meant that his friend and business partner would not be left out in the cold, either, with no store and few prospects. And it would have also made a difference for his widow and children, who face the holidays without their husband and father, and without the income and financial stability he provided.
"Bob just assumed I'd be Larry's partner and the business would go on," Mrs. Gross said. Instead, Gross's estate is moving through probate court and the shares will be divided among his wife and other heirs. "People don't know this is how it works," Mrs. Gross said. "They just assume."
Interestingly, this was no fly-by-night, cut-rate jewelry clearinghouse: "We're not a discount jewelers, our clients wouldn't stand for it," Jaffe said.
So presumably finances were not the reason that the business was left unprotected. We may never know the reason, but it doesn’t really matter; what matters is that this was a problem that had a simple and generally inexpensive solution, but for lack of foresight, was left untreated.
Buy-sell agreements are tools businesses use to ensure that there is a smooth transition should one of the owners die: an orderly transfer of ownership, a mutually agreed upon sales price and terms of sale, and stability for customers, staff and creditors.
Such agreements are especially important when dealing with closely held businesses like Messrs Gross and Jaffe owned. Had one been in place, and properly funded, this business need not have died with its owner.
How simple is it to put together a buy-sell agreement, and how does one fund it? Click for Part 2…