Wyoming Buy-Sell Agreements for Pharmacy Owners

By Brad MacLiver
Authorship and profile at Google


When a WY pharmacy is owned by two or more people the stockholders/partners should have a Buy-Sell Agreement. A buy-sell agreement is a written document that provides the procedures and governs the future sale of the pharmacy business.

Pharmacy buy-sell Agreements protect the interest of the parties who own the Wyoming pharmacy and directs the actions triggered by a stockholder leaving the business due to death, disability, divorce, dissolution, or retirement. The agreement will govern how and when the shares of the pharmacy business in Wyoming can be sold, or transferred. It will also provide guidance as to how the pharmacy will be valued along with the obligations of the remaining shareholders of the pharmacy.

Buy-sell agreements are important because the different elements of a future sell are predetermined and won’t need to be negotiated during a heated dispute, or during a grieving period. It provides both the stockholder and the family a comfort level that when the inevitable time comes for an exit strategy that the process was thoroughly thought out in advance.

Disadvantages of not having a buy-sell agreement between pharmacy owners is that a disability may leave one partner working more and another not adding to the productivity. In the event of a death, without an agreement, one partner may be left with a nonproductive heir, or a new partner may be inserted that has personality conflicts with the surviving partner. The wrong partner could be devastating for the Wyoming pharmacy business.

There are various types of buy-sell agreements such as: Entity Buy-Sell Agreement, Cross-Purchase Buy-Sell Agreement, Wait and See Buy-Sell Agreement, Disability Buy-Sell Agreement. Buy-sell agreements are also known as a Business Will or a Buyout Agreement.

Potential elements of a WY Buy-Sell Agreement:

1. Stockholders names and the number of shares and voting rights of each. 

2. Guidance for the certified pharmacy valuation and purchase of a stockholder’s shares.

3. Mutual covenants and considerations.

4. Restrictions on transferring, purchasing or encumbering the company’s stock.

5. Protocol in the event of a shareholder’s divorce or termination of a shareholders employment.

6. Obligation to buy/sell shares from an estate.

7. Purchase of insurance to ensure ability to meet obligations.

8. Purchase of stock paid in lump sum or by installments.

9. Remedies for breach of the agreement or default of payment.

10. Until transfer is complete the right to inspect books and records.

11. Amendments and notices for offers or legal matters.

12. Enforceability of the agreement, the binding effects, and arbitration procedures for disputes.

13. Outlined process for the dissolution or liquidation of the corporation.

14. Maintaining the premises during transitional periods.

15. Preserving both warranties and representations.

16. Established terms of transfer.

17. Bill of Sale.

To make certain that the money required is available, it is common for buy-sell agreements to be funded with a life insurance policy. Should the death of a pharmacy owner in Wyoming occur, the life insurance settlement provides necessary funding for the remaining pharmacy owner to buyout the partner's shares from the estate.

Each partner needs to have life insurance coverage in place because without a plan to accomplish the purchase of the Wyoming pharmacy shares the buy-sell agreement serves no purpose. As the business develops and grows, the amount of insurance will need adjusting to provide adequate coverage. Without proper insurance, the surviving stockholder will potentially not have enough cash to satisfy the amount needed to buy out the estate, leaving the survivor stuck with an unwanted partner.

In order to have adequate insurance coverage and determine the details of the buy-out terms, it is necessary to perform a certified pharmacy business valuation.  There are quite a few companies that provide standard business valuations, but due to the dynamics and current market state of the WY pharmacy industry, a valuation firm should have extensive experience with Wyoming pharmacies. Simple accounting formulas and multipliers will not provide an adequate, or realistic, valuation for a pharmacy business.

Pharmacy buy-sell agreements are extremely important documents that need to be completed with seriousness and care. Even with a long standing partnership, it is only too late to create a buy-sell agreement when an event has already occurred....that would require the document.

Tips:

1. Buy-Sell Agreements are critical documents that should not be taken lightly. Consult a licensed professional.

2. Documents must address the proper laws and regulations which vary from state to state. Seek the proper guidance.

3. Premiums for insurance that will fund the buy-sell agreement might be deductible.

4. Ensure that the Wyoming pharmacy valuation is performed by an established WY pharmacy industry expert.