Buy-Sell Agreements
When we use the term Buy-Sell Agreement, we are not talking about a contract in which you promise to buy a business. Rather, the Buy-Sell Agreement of which we are speaking here, is a binding contract among the owners of your business that controls the buying and selling of ownership interests in the business.
The major benefits of adopting such an agreement are as follows:
- It may be that you are working with and sharing control of your company with a less experienced individual who buys the interest of a departing owner.
- It may be that you are forced to work with a spouse or other family member of a deceased or divorced owner. Here the possibility exists that this individual will lack the necessary business skills or the right personal qualities for working with both you and your other fellow owners.
- Should you leave the company or pass away, you or your survivors may possess a very small business interest which no third party wants to purchase and, moreover, for which no other insider (other owners in the business) will offer you a fair price.
- Likewise, you and your co-owners may argue with a departing co-owner or the inheritors of that co-owner over what price should be paid for the interest that now belongs to someone else. A buy- sell agreement will avoid an angry deadlock in this regard.
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