Some think of a buy-sell agreement a will for your business. A buy-sell agreement, also known as a buyout agreement, is a legally-binding contract meant to spell out exactly what happens in the case you or another owner leaves your business. Every company with more than one owner needs a solid buy-sell agreement in place.

Buy-sell agreements are constructed to protect the company if someone leaves. A proper buy-sell agreement maintains continuity should a problem arises and lets the owners have some control over what will happen next. Whether through a planned departure, a death or a disability, over time things will change and a company is best protected when there is a plan in place.

A good plan lays out a path for a departing member. This is especially crucial in cases of death so a spouse or child who is uninterested or uninvolved in the business doesn’t automatically gain control of the business by default.

A buy-sell agreement addresses who can buy a departing owner’s shares or interest in the company as well as what events can trigger a buyout, where the money comes from to complete the buyout and what the price of the buyout would be.

It is crucial a buy-sell agreement addresses who can buy the departing owner’s shares or interest in the company. Losing a key company player can have major effects on the company, the business and those who remain. Concerns may arise if someone wants to buy into the company, but has plans to hurt and not grow it. This helps the remaining owners have a say in where the shares go.

When an owner retires, becomes disabled, divorces, has great debt and or dies, a buy-sell agreement lays out the next steps for the company to maintain control. In any of these events, a buy-sell agreement guarantee owners that their shares of stock will be bought out.

It is important a buy-sell agreement addresses where the money will come from to complete a buyout. Many businesses have insurance policies that can fund a buyout when needed.

If your company has more than one owner, it is imperative to have a solid buy-sell agreement in place. Call our offices today for a free, initial consultation.