Dave died. Upon his death, Sam continued to pay Dave’s salary to his wife, as promised.

1. CASE STUDY #1 Car dealership and block of land Dave Sam Continues to pay Dave’s salary Dave’s Wife Dave’s Children Mates who “don’t need a buy/sell” Sam and Dave had grown up together, their families knew each other and they owned a car dealership together. Dave’s kids referred to his business partner as “Uncle Sam”. Sam and Dave didn’t need a buy/sell agreement because they were best mates. They had an verbal understanding that, in the event of either of their deaths, they would continue look after each other’s wives and pay the deceased’s salary to the deceased’s wife. Dave died. Upon his death, Sam continued to pay Dave’s salary to his wife, as promised. This continued for 5 years, at which point Dave’s wife passed away. Dave’s share of the business passes to Dave’s 3 children through his wife’s Estate. They had no interest in being in the business and were looking to be bought out, which suited Sam. Sam informed Dave’s children that he and Dave had verbally agreed that each partners share in the business was worth $1.5m. After an independent valuation, which occurred during probate, Dave’s children inform Sam that the valuation means the business is worth $2.5m. Hostility between the two parties ensues. Sam points out that he can’t afford $2.5m without mortgaging all his assets. Dave’s children appoint an independent director who refuses to pay Sam’s salary, saying it is too high and this is a breach of his director’s duties. Sam takes a wage cut. The independent director also reports Sam to the ATO for falsifying statutory returns as he has paid Dave’s wife’s salary for 5 years, stating that she was an employee when in reality she didn’t work a day in the business- she was merely paid a salary. In the end, Sam paid Dave’s children $2.2m for their share of the business and all legal fees. SOLUTION: Documented Buy/Sell agreement and adequate insurance