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When Preparing a Buyout Agreement, Get a Machinery and Equipment Appraisal

March 12, 2014

If a co-owner of a business wants to sell or retire, or if the other partners want someone out, they will have to draw up a buyout agreement, or buy/sell agreement. This agreement details the way a business will buy the co-owner’s shares and is intended to protect all parties involved in the buyout. Don’t wait to write this agreement until you need one. Instead, create it as close to company’s inception as possible, because as the company’s value grows, the risk of not having one increases.

A buyout agreement should contain a few standard elements. It should detail the buyout’s financial terms, state who will oversee the buyout, and discuss ownership transfer. It also should detail how the owners will determine the company’s value at the time of the buyout.

Many things factor into the value of a company, so professional assistance is often required to determine the true value of a business. Often, a buyout agreement will state that a third party, like a certified machinery or equipment appraiser, should determine the company’s value. A certified appraiser will be able to provide a fair and accurate value that will be defensible in court.

If you’re writing a buyout agreement, a good exercise is to hire an appraiser to conduct a business valuation, including an appraisal of all machinery and equipment, just before starting to write.

The NEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

By: NEBB Institute

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