This document provides for the "buyout" of an owner's interest when that owner leaves. Here are the areas that a buy-sell agreement should typically address.
* Describe the events that will trigger the agreement, such as a
divorce, disability, death, or notice that an owner simply wants to leave.
* Set a value for each owner's interest, or provide a formula to
value each interest at a later date. Your agreement might require an
independent business appraisal.
* Without a method to set the value, there could be some serious
problems. Let's say you and your partner reach a point where you can no longer
work together. You believe the company is worth $2 million. Your partner
refuses to sell, but he makes you a $100,000, take-it or leave-it offer for
your 50% interest. You could face a drawn-out legal battle to settle things.
* Outline a funding plan. Different purchase and financing plans
can be used to cover different situations. For example, cross-purchase
agreements allow the remaining owners to buy an exiting owner's share. A
redemption agreement allows the company to buy back an exiting owner's share.
Financing options might include owner financing (an installment contract) or
life insurance, in the case of an owner's death.
* Prevent unwanted transfers. Generally owners don't want a
business associate they didn't choose. Yet this could happen if one owner
divorces, dies, or sells his shares to an outsider.
A buy-sell agreement is designed to provide
fair compensation to an exiting owner, while making it possible for the
remaining partners to continue in business. We can work with you and your
attorney to develop a buy-sell agreement or to review your existing agreement.
Call us at (518) 798-3330.
