A buy-sell agreement is an agreement between the owners of a company, which sets forth certain guidelines for the future of the company should one or more of the owners no longer take part in the ownership of the company. A buy-sell agreement may be contained in the company’s organizational documentation or may be a separate agreement entirely, and serves two important purposes:
- it limits any transfers of the owner’s interests in the company, and
- provides for an easy and orderly transition of ownership in the event of an owner’s death, retirement, or disability.
Buy-sell agreements are very common among small businesses that have more than one owner. They are especially desirable for owners who take an active role in the company or for businesses that are owner-operated or family operated and run. While owners who play only a financial role in a company may be less concerned with its future, owners who have a hand in the company’s management will likely insist upon having a buy-sell agreement.
One of the most common provisions in a buy-sell agreement requires that the remaining owners purchase the interests of an owner who ceases to be involved with the company. The loss of an owner can cause your company to suffer already, and a buy-sell agreement can prevent you from the additional losses that accompany costly disputes.
A business attorney will be able to help you draft a thorough buy-sell agreement that meets the needs of your company. Whether you are interested in protecting the future of your company by creating a buy-sell agreement, or if you already have one, an attorney with business experience will be able to preserve your rights and protect your company.