Employment and consulting agreements for selling funeral directors: what to negotiate

Most funeral home sales include a second contract that gets far less attention than the price: the agreement that says what the selling director does after closing. The buyer wants the town’s trust to carry over; you may want an income bridge or a gradual exit. The terms decide whether that feels like a dignified handoff or a demotion in your own building.

This guide goes term by term. For the bigger choice of whether to stay at all, see keeping a consulting role vs. a clean exit; for how this contract fits the whole sale, start with the seller’s guide to selling a funeral home.

Should your post-sale agreement be employment or consulting?

The buyer’s financing often decides it. If the buyer uses an SBA 7(a) loan for an initial acquisition, employment is not allowed and consulting is the only option; otherwise the choice turns on control, taxes, and benefits.

Appendix 15 of the SBA’s SOP 50 10 8.1, effective October 1, 2026, says the seller in an Initial Acquisition or Business Expansion “may not remain as an officer, director, stockholder, or employee of the business.” The business may hire the seller as a consultant for no more than 24 months in aggregate, including any extensions. First-time buyers lean on SBA money, so this rule shapes many family-to-family sales.

A label does not settle the question. A “consultant” who works a set schedule under the buyer’s direction may be an employee in the IRS’s eyes, so write the contract to match how you will actually work.

What role, title, and hours should you agree to?

Write down your duties, a weekly hour range, and on-call duties. Vague roles drift toward full-time work at part-time pay, or toward being sidelined.

A funeral home never closes, so “part-time” needs a definition. Say whether you take night removals, how many weekends a month you cover, and whether you meet at-need families or only handle preneed and community work. One pattern we often see: full-time for the first 90 days, then about 20 hours a week, with no on-call duty after month six.

Titles carry weight in a small town. If the buyer promises “founder” or “director emeritus” on the website and obituary pages, record it in the Legacy Terms Ledger and test it: is it written, how long does it last, what is the remedy if it is broken, and does it survive a resale?

Your license and the funeral director in charge

Your license is personal; it does not transfer with the business. If the buyer wants you named funeral director in charge during the transition, check the state rule first. South Carolina, for example, defines the required manager as a licensed director who is a “full-time regular employee” in S.C. Code § 40-19-20.

A consulting-only seller cannot fill a role defined that way. In states like that, an SBA buyer needs its own licensed manager ready on closing day. See the funeral director in charge at and after closing and our South Carolina funeral home broker page.

How much should a selling funeral director be paid after closing?

Pay should match the work at a market rate. When a buyer moves part of the price into salary or consulting fees, the seller usually pays more tax and takes on the risk of not being paid at all.

Buyers suggest the shift because fees are deducted as they are paid, while goodwill is amortized over 15 years under 26 U.S.C. § 197. For you, goodwill is often taxed as capital gain. Fees are ordinary income, and consulting fees add self-employment tax, which the IRS sets at 15.3%: 12.4% for Social Security on the first $184,500 of 2026 earnings, plus 2.9% for Medicare.

Agree on the price first, then price the job. If the buyer insists on the shift, ask for a higher total or fees guaranteed even if it ends the contract early.

How long should the term be, and how can it end?

Choose the shortest term that transfers the relationships, usually 6 to 24 months, then spell out every way the agreement can end and what you are paid in each case.

1. For cause. Limit it to serious events: a felony conviction, loss of your license, or a material breach not fixed within 30 days of written notice. A missed call-volume target should never count.
2. Without cause. If the buyer ends the agreement for any other reason, the rest of the term is paid, in a lump sum or on the original schedule.
3. Good reason. You may resign and be paid out if the buyer cuts pay, materially changes your role, or breaks a written legacy commitment.
4. Death or disability. Payments continue to you or your estate for a defined period.
5. Your own resignation. State the notice period, often 30 to 60 days, and what you give up.
6. Resale of the business. Consolidators and PE platforms do resell. The agreement should bind successors and assigns.

Watch for pay that rises or falls with call volume. SBA rules prohibit seller earnouts, and a performance-linked fee may look like one to the lender.

What benefits and protections should you ask for?

Ask for the protections an employee would expect, even as a consultant. They cost the buyer little.

• Health coverage until Medicare eligibility or the end of the term, or a monthly stipend if you are a consultant.
• License renewal fees and continuing education, paid while the buyer relies on your license.
• Liability coverage and indemnity for work after closing; the asset purchase agreement handles claims from before closing.
• Use of your name and likeness, limited to agreed uses and ending when the agreement ends unless your legacy terms say otherwise.

How does the non-compete interact with your employment agreement?

There are usually two restrictive covenants: one in the purchase agreement tied to the goodwill you sold, and one in the employment or consulting agreement tied to the job. Keep them separate, and make sure losing the job early does not extend either one.

The FTC’s 2024 nationwide non-compete rule never took effect. On September 5, 2025, the Commission voted to dismiss its appeals and accede to vacatur of the Non-Compete Clause Rule, so state law still governs. Many states treat sale-of-business covenants more favorably than employee restrictions, but rules vary; have your attorney check yours. Our funeral home non-compete definition covers radius and length.

Resist a large allocation to the non-compete itself. It is ordinary income to you, yet the buyer still amortizes it over the same 15 years as goodwill under § 197, so the buyer gains little. Both parties must also report these side agreements: line 6 of Form 8594, explained in the IRS instructions for Form 8594, asks about any covenant not to compete or employment contract and its maximum consideration.

What should you check before you sign?

Review the agreement with the same care as the price. Most problems we see trace back to a term that was left out.

See the selling director employment agreement definition for the basics and taxes on selling a funeral home for how the allocation reaches your return. Talk to your CPA and transaction attorney before agreeing to any of these numbers.