Using Tax Strategies When Selling a Pharmacy in Oklahoma

By Brad MacLiver
Authorship and profile at Google


Industry Roll-Ups are when the many players of an industry consolidate into smaller groups for economic benefits. OK pharmacy buyers participate in the Oklahoma pharmacy industry roll-up to achieve economies of scale in purchasing, marketing, information systems, distribution, top management, and logistics. Pharmacy sellers both independent owners and drug store chains must consider their current market value, recognize the narrowing of profit margins, and realize what their tax consequences will be if they sell.

When pharmacy owners sell their pharmacy in Oklahoma it is considered a capital asset. The difference between the amounts it is sold for and the amount spent to either purchase or start the Oklahoma pharmacy is a capital gain, or a capital loss. In the U.S., all capital gains must be reported and the appropriate tax paid.

Specific tax strategies can be used to help offset the tax liabilities when selling a pharmacy or a drug store. Unless a professional is handling a large number of pharmacy acquisitions, they usually do not know these federal regulations that allow for reducing the tax liability for the Oklahoma pharmacy owner.

Many Business Brokers, CPA’s, attorneys, and other professional advisors inform their clients that selling a pharmacy will result in tax consequences. However, most of these professionals do not handle the buying and selling of Oklahoma pharmacies on a daily basis and may not realize the different aspects of structuring a pharmacy transaction allowing the reduction of the tax burden to the pharmacy owner in OK.

There are some strategies for capital gain taxes that must be implemented before any obligation to sell the pharmacy. When a drug store owner is considering selling their OK pharmacy either now, or in the next few years, it is urgent the best course of action be considered now instead of later.

Estate planning when selling an OK pharmacy should also be a consideration. Specific federal regulations allow an asset to be converted to an income stream, provide a tax deduction, increase asset diversification, and provide risk reduction, along with offering effective retirement and estate planning. If the pharmacy seller is nearing a retirement age, or will be working as a pharmacist for another company in Oklahoma, instead of being an owner, then estate planning should also be considered.

As reimbursements are cut, more regulations are applied, and pharmacy profits continue to slip, more independent pharmacy owners along with small and regional pharmacy chains will be considering selling their pharmacies and drug stores in Oklahoma. Tax considerations should be a paramount part of the decision process.

Pharmacy owners should consult with a pharmacy industry expert for advice on structuring the sale of their Oklahoma pharmacy. Someone with extensive experience in pharmacy and drug store acquisitions will have the knowledge and expertise to structure the transaction for tax considerations. Like all tax planning issues, waiting until the end of the year is not always the best strategy. Following this advice can place larger sums of money in the bank of pharmacy owners when an Oklahoma pharmacy is sold.

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Oklahoma Bridge Loans and Pharmacy Acquisitions

By Brad MacLiver
Authorship and profile at Google


With the changes in the OK pharmacy industry independent drug store owners, small and regional pharmacy chains in Oklahoma, and pharmacy equity investment groups are acquiring pharmacies to obtain a larger competitive footprint in a geographic area. During the acquisition phase of the business expansion there may be opportunities that require action, which is faster than the traditional funding process.

Bridge Loans are a short-term financing option and are used while waiting for permanent financing, or the next stage of financing to be obtained. Bridge loans provide funding to "bridge" the gap between a company’s current needs and their long term financing requirements.  Permanent financing is generally used to "take out," or pay back, the bridge loan.

One of the characteristics of a bridge loan is that they can close quickly, which in turn allows a company to capitalize on a timely business opportunity, or acquisition. The quick access to money can also allow a business the chance to avoid penalties, bankruptcy, or other temporary problems. If longer term issues need to be dealt with, this “transitional financing” provides the company time until longer term financing can be secured.

Another characteristic of bridge loans is that the process usually requires less documentation than conventional financing. It is often the case that bridge loan lenders don’t have the same government regulations to adhere to.  This means they can have more flexibility in their lending criteria and the documentation they require, but less documentation does not mean they won’t perform due diligence to have a level of comfort with the transaction before they fund.

Scenarios of using Bridge Loans in Oklahoma Pharmacy Transactions:

1. An independent OK pharmacy owner learns of health issues and decides to quickly sell the family owned pharmacy to an employee or local competitor. A more traditional method of financing for the Oklahoma pharmacy buyer may require a time line that is not acceptable when considering the circumstances. A bridge loan can be used in this situation to quickly accomplish the transaction.

2. A small pharmacy chain in Oklahoma requires $1 million for their business to expand. They have 3 new equity investors that will be investing in the firm over a period of 6 months, but each at different intervals.  The business has opportunities that require action before 6 months. The bridge loan closes quickly and allows the Oklahoma pharmacy chain access to the needed funds so they can complete their expansion and increase profits and the money from the 3 new equity investors will pay off the bridge loan.

3. A pharmacy owner in a leased location has the opportunity to acquire a commercial property quickly.  It would be a great Oklahoma pharmacy location, but the property is badly in need of repair. A bridge loan can provide the needed funding to acquire and rehab of the property. Once that is complete, more conventional long term financing can be obtained.

4. An OK pharmacy group developing new pharmacy locations can receive bridge loan funding to get through the permitting process of a project when conventional financing isn’t available at this early stage due to there is still too much risk. A bridge loan enables the project to move into the construction phase, then qualify for other forms of financing.

5. When a pharmacy is owned by at least two partners and one of the partners is ready to exit the business, a bridge loan helps to ensure both cash flow and uninterrupted operation of the business during the partner buyout.

6. Real estate, or equipment bought at auction may have a narrow window for closing the deal and timing of traditional financing would keep the buyer from proceeding with the opportunity. Benefits of a bridge loan will permit the pharmacy owner Oklahoma to quickly respond to the opportunity.

When there are business opportunities, buying pharmacies, selling Oklahoma pharmacies, quick deadlines, an old loan maturing before a new loan can be put in place, funding needs during the permit, planning, or evaluating stages, etc., bridge loans can be an essential financial tool.

Tips regarding Oklahoma pharmacy bridge loans:

1. Bridge loans are quick to obtain, but quick to expire.

2. A bridge loan is similar to a hard money loan and the terms are often used interchangeably in conversations. Both are short-term, higher interest rate, non-standard loans, but in some circles hard money refers to the lending source and a bridge loan refers to the duration of the loan.

3. Because bridge loans usually come with higher interest rates than traditional financing a larger down payment, meaning a lower Loan to Value (LTV) and a lower level of risk and provides an opportunity for lower interest rates.

4. With the shorter time period of bridge loans borrowers will need to be aware that fees for valuations, legal, dues diligence, etc., will be amortized over a shorter period than traditional financing transactions.

Understand the types of deals that require a bridge loan may be considered speculative in nature, or have higher risk factors. Due to this many banks do not offer bridge loans. Banks must meet government regulations and need to justify their lending practices. Riskier bridge loans do not usually fall within the lending parameters of many banks. Therefore a majority of the bridge loans will come from private investment firms.  It is best to consult a company that has access to a number of funding sources who provide bridge loans.

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Acceleration Clauses for Oklahoma Pharmacy Business Loans and Commercial Leases

By Brad MacLiver
Authorship and profile at Google


A provision of many Oklahoma (OK) pharmacy business loans and commercial leases is an acceleration clause. The acceleration clause in the loan/lease agreements allows the lender to accelerate their collection of payments contingent on an event occurring. These events may include lack of payment by the borrower, failure to keep the property adequately insured, failing to pay tax assessments, not maintaining the property, selling the property/asset, etc.
                     
Lenders view the acceleration clause as an important tool in their business loan and commercial lease programs. Loan and lease documents might not specifically address the foreclosure of a property, or repossession of an asset, but this is where the acceleration clause comes into effect. Without this clause, the lender would be able to foreclose on only one missed payment at a time. By having the acceleration clause, the lender can demand immediate and full payment of all remaining balances and fees despite whatever event kicks the clause into gear.

The pharmacy business loan or lease documents provided to the Oklahoma pharmacy owner will describe the rights, obligations, and conditions relevant to the acceleration clause. When the pharmacy owner, the borrower, fails to meet their obligations, the loan or lease then goes into default. A payment that is only one day late can cause a default, which means pharmacy business loans and commercial lease documents should be thoroughly read and understood before signing.

Tips for Oklahoma Pharmacy Owners:1. If a pharmacy’s slowing cash flow is going to cause a business loan default, but the pharmacy owner has additional unencumbered assets they may be able to negotiate with the lender by offering additional collateral.

2. If an Oklahoma pharmacy can catch up on their payments they can reinstate the business loan before the acceleration starts.

3. States have different rules requiring notification of an acceleration clause being exercised. Pharmacy owners should understand the laws in the state where they operate. Lack of knowledge is not an excuse.
                                 
4. When an acceleration clause is exercised on a commercial lease, there is the possibility the landlord cannot collect rent from both the defaulting tenant and a new tenant at the same time. To save themselves some money, OK pharmacy owners should help the process by assisting the landlord re-lease the property. However, please note, should the pharmacy be in the process of being sold and the files and inventory moved to a competitor’s location, the pharmacy buyer will require restrictions in the Purchase and Sale Agreement  that the new tenant cannot be another Oklahoma pharmacy.

5. Lenders prefer not to have to go through the foreclosure process, so if your pharmacy is headed in that direction start talking with the lender about finding a solution. Communication with the lender is a good thing.

6. Some pharmacy business loans and commercial leases require a “personal” guarantee from the business owner. This means that the business owner’s personal assets and credit will become involved in the event of a default. The “corporate” status of the business will not keep the lender from seizing the personal assets.

When considering financing an OK pharmacy for acquisition, or expansion, due diligence and understanding of all aspects of the transaction should be considered. Using the services of a pharmacy industry expert to guide an Oklahoma pharmacy owner through the maze of details will benefit the pharmacy owner in making the best business decision.

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Pharmacy Acquisition Finance in Oklahoma

By Brad MacLiver
Authorship and profile at Google


When an OK pharmacy or drug store is being sold, seldom does the buyer pay “out of pocket” cash for the acquisition. Even when cash is available, Oklahoma pharmacy acquisition strategies usually involve financing the transaction.

Typical acquisitions take 6-9 months to complete, so the pharmacy seller in Oklahoma will need the buyer to provide some proof up front about their ability to close the transaction. Acquisitions will involve many hours of due diligence and negotiation, so the process should involve qualified parties.

Along with the buyer and seller the acquisition will involve attorneys, accountants, lenders, valuation companies, industry specialists, along with others. No one wants to pursue 6-9 months of work involving a variety of highly paid professionals without having some confidence of the pharmacy buyer’s ability to close the deal.

The process will begin with determining the value of the business. There are many companies that offer valuation services. However, pharmacies in Oklahoma are not ice cream stores. There are many aspects of valuing a pharmacy that are unique to the industry, so generic valuations or simple accounting formulas should not be used. An industry specialist should be used for valuing the pharmacies instead of a valuation company that has a broader spectrum.

In order to complete a valuation the selling company needs to provide up-to-date data. Lenders will not accept old data, or a sellers “gut feeling.” Lenders need to make a decision to finance based on sound and verifiable information.                

Structuring the transaction is extremely important. The seller of course wants as much money as possible and wants cash. The buyer needs to spread out the debt service and wants to have as little cash as possible invested in the acquisition.

Pharmacies and drug stores are in an industry where it is more difficult to obtain business loan due to the majority of the value in a Oklahoma pharmacy is the customer files and not hard assets. Therefore, for the acquisition to be financed a lender will need a strong understanding of the industry and what, beyond the collateralized assets, the company offers to reduce the perceived risk.

Oklahoma Pharmacies have typically been known for generating profits and to be stable businesses, but they are typically operate in leased locations.  Also, their furniture, fixtures, and computers will only provide about $15-20,000 worth of collateral to a buyer who is possibly requesting a million dollar loan. Lots of money will be tied up in inventory, but lenders will considers its small pills as easy to move out the door in the event of default. Due to these circumstances many lenders will not loan money to these traditional money making businesses. A successful transaction takes a lender that understands the pharmacy industry.

Here are some additional tips about pharmacy acquisitions and finance in Oklahoma:

1. Attorneys and CPAs that have represented the pharmacy seller for many years could view the transaction as putting themselves in a position of losing a client after the business is sold. Make sure they are working diligently on the transaction and are not slowing or undermining the process.

2. Since OK pharmacy acquisitions involve 6-9 months of work to complete , all parties involved need to be aware of time tables. Much too often, items of importance end up sitting on the desk of someone that is outside of the control of the buyer or seller.

3. All financial information needs to be current. Over the lengthy process the data supplied to both the buyer and the lender will need to be updated on a continuous basis. Things can change drastically during a nine month period and the Oklahoma pharmacy seller will need to continually prove the financial condition of the company.

When pursuing “pharmacy acquisition finance” in Oklahoma, for the best chance of success, make sure the valuation company and the lender have expertise in that industry. Choose a company that has the pharmacy experience and expertise, and is a direct correspondent with lenders who understand pharmacy.

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Pharmacy Industry in Oklahoma: Current Market Conditions

By Brad MacLiver
Authorship and profile at Google


Currently there are a number of factors that are impacting the current market conditions of the U.S. pharmacy industry in OK. These factors are affecting the pharmacy business valuations of pharmacies in Oklahoma and drug stores all across the U.S.

Local demographics:

The valuation process also includes local market conditions and local demographics. Smaller communities have less growth potential and with the declining profits a buyer will need to purchase at a lower value because they will have to service the debt from a business loan and still try to make a living. The same is true for communities that have lost population due to economic conditions, or have a high rate of unemployment. Fewer people, or fewer customers with the ability to purchase, will mean fewer sales and less chance of any substantial improvement in the near term. This results in a lower pharmacy business value.

Pharmacists Shortage in Oklahoma:

Oklahoma pharmacies and drug stores across the country have had difficulties in finding pharmacists.  This shortage of pharmacists not only affects employee opportunities it also affects the number of potential independent buyers. 

Fewer Buyers:

There is also a fewer number of corporate buyers. Some of the largest pharmacy chains have been purchased and consolidated in the pharmacy industry roll up in Oklahoma. Many smaller chains have run into financial trouble and have stopped their expansion. It is tougher to drive a price higher when there are fewer willing or capable to purchase.

Current Market Conditions Requires Industry Roll-up:

The consolidation of the pharmacy industry in Oklahoma is required to get more traffic into a single store.  Simple economics says that when any business has a reduction in profits, they appear less attractive to a buyer and pharmacy business values drop. Various factors contribute to the downward pressure of pharmacy values and there is not any expectation of a turn around. Pharmacy owners should not be fooled by inexperienced Brokers claiming grand outcomes and over stating pharmacy business values not based on realistic market conditions.

With the consolidation of the pharmacy industry that has been happening for several years, many new brokers have entered the market to broker pharmacy acquisitions. Most brokers do not have pharmacy related experience, nor do they use current market conditions when they value an Oklahoma pharmacy. Most are using simple accounting formulas that hold no sound reasoning for the value when faced with current pharmacy market conditions. Due to this many brokers are valuing pharmacies 2 to 3 times more than what the market is really willing to pay. Any inexperienced person can quote a high value to capture a listing.  However, that does not mean the over inflated asking price is what the business will actually sell for.

Mail Order:

Some insurance companies are designating a noticeable amount of OK pharmacy patients as “long-term medications” and require they only purchase the medications from mail order pharmacy companies who provide products at lower prices. This results in local pharmacies not only missing out on prescription sales, but front-end sales will also decline since the customer is not entering the store. Pharmacy mail order sales have now surpassed sales from independent retail pharmacies.

Choose a firm that provides pharmacy business valuations based on real market conditions and does not use a simple formula for calculating the value of an Oklahoma pharmacy. Complex methods are used to derive the value of a pharmacy.

It is best to use a company that specializes in pharmacy and has extensive and current industry data.  Choose pharmacy specialists who have been working in the Oklahoma pharmacy industry long enough to have extensive pharmacy experience and an excellent reputation.  A company with good credentials possesses large amounts of national data.  The largest financial institutions, national chain pharmacies, regional pharmacy chains, independently owned drug stores, and pharmacy equity investment groups use the services of companies fitting this description.

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340B Pharmacy Discount Programs in Oklahoma

By Brad MacLiver
Authorship and profile at Google


The U.S. Department of Health and Human Services has a program that provides for discounted prescription drugs to qualified Disproportionate Share Hospitals (DSH), Federally Qualified Health Centers (FQHC), and other entities that qualify. When these facilities do not have their own pharmacies, they are permitted to contract with a local OK pharmacy. The drug pricing program, named after the section of law which established it, is often referred to as 340B.

Section 340B legislation was enacted to provide uninsured and indigent populations with access to deeply discounted medications. Since the program was enacted to assist certain populations there are restrictions and regulations in how the program operates and who the medications can be dispensed to.

Oklahoma Pharmacies can be contracted by a FQHC, or similar 340B qualified entity, to manage and dispense the medications. Patients from these entities provide additional traffic in the pharmacies allowing the pharmacies the opportunity for additional front end sales along with the Rx sales.

Pharmacy owners participating in a 340B pharmacy program need to manage their business consistent with customary business practices. In the event of an audit the Oklahoma pharmacy should have dispensing and inventory records, billing statements, etc. Business records should show that drugs purchased by customers, under the 340B Drug Pricing Program, were not diverted to people who are not part of the program.

Along with the additional record keeping a pharmacy owner will need employees who understand the various state and federal rules and regulations, which govern the 340B program. The pharmacy will also need to have a location for the 340B inventory, which is separate from their normal inventory, or have a software management system to track the separate inventories.

A system of separating the inventory is required due to the drug inventory used for the 340B pharmacy program is owned by entity that contracted the pharmacy in Oklahoma. Since the 340B inventory is not “owned” by the pharmacy this inventory will be treated differently for tax purposes. The pharmacy generates income from dispensing fees they are paid instead of a mark-up or profit margin on the inventory.

Since customers participating in a 340B program can only purchase the designated medications from a pharmacy contracted with a 340B entity, this allows a pharmacy to have a market niche. A contracted pharmacy servicing 340B customers benefit from additional customer traffic visiting the store.

With the current economic situation and high unemployment, many people have lost their insurance benefits. This will likely expand the need for 340B pharmacy programs and provide additional 340B customers to a participating OK pharmacy.

However, when an Oklahoma pharmacy owner is weighing the potential benefits of a 340B program, they should also consider other aspects of their business and the current market conditions of the pharmacy industry. What are the pharmacy’s goals over the next couple years? A younger pharmacy owner with long term objectives can benefit for many years from the added customers. However, a pharmacy owner considering selling the business in the next couple years should be aware that acquisition values are based on the customer files, and many buyers are not currently willing to include 340B customer files in their offers. This results in a lower pharmacy business valuation and market price for the pharmacy despite the volume of business. Also, due to the current economic conditions there are some 340B customers who despite the deeply discounted prices, have chosen not to purchase medications. Pharmacy owners in Oklahoma need to consider the added costs and time of 340B inventory and customer tracking and reporting, may not be offset by the fees received.

If a pharmacy owner is considering the benefits of participating in a 340B program, or is considering selling the OK pharmacy in the couple years, it is advisable to discuss the options with the pharmacy industry expert.

 

Pharmacy Transactions and Capital Gains Tax

By Brad MacLiver
Authorship and profile at Google


Almost everything you own and use for personal, or business, purposes is a capital asset. When pharmacy owners sell a capital asset, the difference between the amounts you sell it for and the amount you paid for it (the basis), is a capital gain, or a capital loss.

One strategy, but not the only one, that is currently available to assist the capital gains tax burden is the Charitable Remainder Trust (CRT). CRT’s are legally described as Split Interest Trusts. The term is used because of the blend of philanthropic motivations and personal financial aspects. CRT’s can decrease tax liabilities, increase a business owner financial wealth, and at the same time provide a vehicle for charitable giving.

CRT’s are formed when a person donates assets to this special type of Trust. Assets can be cash, stocks, real estate, etc. The CRT is set up for a set period of time, or until the donor’s (pharmacy owners) death. An individual (pharmacy owner or family member) can receive income from the Trust’s assets. Upon the donor’s death the assets go to a designated charity. Part of the income from the Trust can be used to purchase life insurance on the donor. The proceeds of the life insurance go to a designated heir(s) who receive the money without incurring any estate tax liability.

CRT’s are a tax-planning tool and professional financial planners are using CRT’s to maximize their clients’ financial position, and at the same time increasing charitable donations.

Third party appraisals, or pharmacy business valuations, must be completed to determine the asset or business value. For the charitable deduction, the donated value will be limited to the cost basis of the asset and not the current fair market value. CRT’s, as a concept, are very simple to understand. However, strict and complex tax rules govern how and when a CRT can be set up.

As a tool for reducing capital gain taxes, CRT’s are often used when a business, or other highly appreciated asset, is going to be sold. In accordance to the IRS codes, assets must be transferred to the CRT before there is any obligation to sale the asset. Since CRT’s are irrevocable trusts, the assets cannot be taken back out of the CRT once donated. An owner of an asset, whose sole purpose it to attempt to reduce capital gain taxes on the sale of an asset, must be warned that if after the transfer of the asset to the CRT, and the sale of the asset does not happen for any reason, the asset cannot be returned. Strict, complex, and specific procedures must be followed in order to take advantage of the CRT benefits. Only someone who has advanced knowledge in these matters should be retained to guide the donor through the process of setting up a CRT.

To qualify as a CRT the trust must meet all the requirements set forth in the Internal Revenue Code 664, and must, from its creation, in every respect meet the definition of, and function exclusively as a CRT. The requirements cannot be met unless each transfer to the trust qualifies in itself as a charitable deduction under the Internal Revenue Codes.

There are issues that may affect the status of the assets ability to be donated to a CRT. Non-qualifying assets may reverse the benefits of the CRT causing the CRT to lose its tax-exempt status.

When the CRT ends at its designated time period, or with the death of the donor, the remaining assets in the Trust will pass to the charitable organization. The designated charity can be any legally formed tax-exempt organization including a family foundation.

As tax rates increase more business owners will use tools such as the CRT to legally put more money in their pocket instead of the governments. Business owners selling a large asset, or their company, typically use the money to invest in other assets whether it is new equipment or real estate, business or personal.

Washburn & Associates has extensive experience in pharmacy and drug store acquisitions. This pharmacy consulting firm and others who have the knowledge and expertise to structure the transaction appropriately, for tax considerations, can save a pharmacy owner large sums of money when a pharmacy is sold.

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Buy-Sell Agreements for Pharmacy Owners in Oklahoma

By Brad MacLiver
Authorship and profile at Google


When two or more people own an OK pharmacy the stockholders/partners should have a Buy-Sell Agreement.  This is a written document that provides the procedures for and governs the future sale of the pharmacy business.

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

It is important to set up buy-sell agreements because the different elements of a future sell are predetermined and won’t require negotiation during a heated dispute during a grieving period. They provide both the stockholder and the family a level of comfort that, when the inevitable time comes for an exit strategy, the process was thoroughly thought through in advance.

The disadvantages of not setting up a buy-sell agreement between pharmacy owners is that a disability could leave one partner working more while another isn't adding to the productivity. Without an agreement, one partner may be left with a nonproductive heir in the case of a death, or a new partner that has personality conflicts with the surviving partner may take their place. Having the wrong partner could be a devastating situation for the Oklahoma pharmacy business.

Various types of buy-sell agreements exist, such as: Entity Buy-Sell Agreements, Cross-Purchase Buy-Sell Agreements, Wait and See Buy-Sell Agreements, and Disability Buy-Sell Agreements.  Buy-sell agreements are also referred to as a Business Will or a Buyout Agreement.

Twenty Potential elements of a Buy-Sell Agreement:

1. Stockholder names and the voting rights and number of shares 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.

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

16. Process for dissolution, or liquidation, of the corporation.

17. Maintaining the premises during a transition.

18. Preserving representations and warranties.

19. The terms of transfer.

20. Bill of Sale.

In order to ensure that the money required is available, buy-sell agreements are often funded with a life insurance policy. Should the death of one of pharmacy owners occur, the life insurance settlement will provide the funds for the remaining pharmacy owner in Oklahoma to buyout the partners shares from the estate.

Life insurance coverage for each partner needs to be in place, because without a way to accomplish the purchase of the pharmacy shares the buy-sell agreement will not be functional. As the business grows and develops the amount of insurance need to be adjusted to provide an adequate coverage. Without the insurance the surviving stockholder may not have enough cash to satisfy the amount required to buy out the estate - leaving the survivor with an unwanted partner.

To have the adequate insurance coverage and to determine the specifics of the buy-out terms, a certified pharmacy business valuation is needed in Oklahoma. There are a large number of companies that provide business valuations. Due to the dynamics and current market conditions of the pharmacy industry a valuation firm should have extensive pharmacy experience. Simple accounting formulas and multipliers will not provide an adequate, or realistic, valuation for an OK 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 Oklahoma pharmacy valuation is performed by an established pharmacy industry expert.