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News & Events
The Buy-Sell Agreement: No Business Should Be Without One
ENLIGN DEAL TEAM | 06/27/2012
In the day-to-day activity of making a business work, many owners overlook the importance of the buy-sell agreement. This document (also referred to as a business continuity agreement) is like a will; no one thinks about it until it's too late. However, it may just be the most important written agreement or document you ever create.
If your business has more than one owner, either partners or stockholders, what happens if one or more of them dies or "wants out"? The same thing holds true in family-owned and operated businesses. A buy-sell agreement can dictate the transfer of business ownership under certain events as described within its specifically-written language.
The well-drafted buy-sell agreement is designed to prevent the following:
- The sale of the company because one of the partners or stockholders desires to exit the business and no one can agree on the price or the terms;
- The necessity to sell or dissolve the business due to the lack of a written agreement determining ownership/management of the business in case of a partner's, stockholder's, or family member's death; (Or, what might prove even worse than a precipitous sale, an heir might decide that he or she is going to get involved in the operation of the business.)
- A lack of agreement on who should take control when an active partner, stockholder, or family member becomes disabled and can no longer run the business;
- A serious dispute on any key issue among the partners, active family members, or stockholders that cannot be resolved; and,
- Questions about business operations following a legally-complicated divorce (or other legal entanglement) involving one of the partners, family members, or stockholders.