Do you have a Buy-Sell Agreement?

A Buy-Sell Agreement is an integral part of any business plan. While business partners anticipate being in business together well into the future, this is not always the case. A Buy-Sell Agreement sets out the terms and conditions for the transfer of ownership of the business in the event of death, disability, retirement or disagreement. The agreement should include a formula or process for calculating the fair market value of the business in order to simplify the buy-out of an owner.

A Buy-Sell Agreement should deal with:

• Who will buy the shares;
• What the terms of the sale will be;
• When the sale will take place;
• Where the money to buy the shares will come from; and,
• How much the purchase price of the shares will be.

Ideally, Buy-Sell Agreements are fully funded, and life insurance and/or disability insurance is frequently used for this purpose.

If you are concerned about how the death of a co-owner might affect your company’s operation, a funded Buy-Sell Agreement can help by ensuring that you will be able to purchase your partner’s share, eliminating any doubts about the continuation of the business. You can also avoid the dilemma of being in business with your partner’s survivors.