A well-considered Buy-Sell Agreement is a powerful tool for any co-owned business. It provides stability, clarity, and a roadmap for handling major transitions, and protecting your investments and relationships. The following principles can be handled in your standard company documents or in a stand alone “buy-sell” agreement. Consider the following for your own business:

Why Do You Need a Buy-Sell Agreement?

There are many potential scenarios that might lead a business owner’s interest to change hands. Knowing what those scenarios are and how they will be handled in advance can save time, money, and ensure your business continues to run smoothly. Some scenarios may be unique to your business arrangement, but common events include:

1. Retirement;
2. Voluntary departure;
3. Significant disability;
4. Death; and/or
5. Divorce where a spouse might gain a claim to business assets.

What Can a Buy-Sell Agreement Include?

Your agreement can outline how to handle any of the triggering events listed above, including:

1. Who may buy the shares or interest of the departing owner, including restrictions on outside transfers;
2. How the purchase price is determined;
3. How the purchase price is paid;
4. Tax considerations; and
5. How any disputes will be resolved.

These can often be big points of contention and the provisions must be carefully considered to try and avoid expensive legal battles, unfair valuations, or even the forced sale or dissolution of your business.

Conclusion

A Buy-Sell Agreement is a strategic safeguard for your business’ future. By addressing potential transitions before they arise, you protect your company’s value, maintain stability among co-owners, and reduce the risk of costly disputes. Taking the time now to speak with us and craft a clear, comprehensive agreement ensures your business is prepared for whatever lies ahead.