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Frequently Asked Questions

How can a buy-sell agreement help in situations of inextricable disputes among business partners or shareholders?

A buy-sell agreement can be a crucial tool in managing disputes among business partners or shareholders. It is designed to anticipate and plan for various situations that could potentially disrupt the smooth operation of a business. One such situation is an inextricable dispute among partners or shareholders that leads to one or more parties deciding to exit the business. In such a scenario, a buy-sell agreement outlines the rights and responsibilities of each partner or shareholder, providing a clear roadmap for the process of dividing the business interest or share of the exiting party. This can help prevent the business from ending up in the wrong hands, such as a disgruntled spouse of a previous owner, or being undervalued due to the lack of a primed buyer. Moreover, a buy-sell agreement can also provide for the possibility of partners taking out life insurance policies on each other. This ensures the availability of capital for the purchase of the decedent's business interest, thereby preventing the business from perishing while the remaining owners or beneficiaries fight for their entitlements or rights. In the case of a sole proprietorship, a buy-sell agreement can enable a top employee to buy the business interest and become the successor in ownership, thus ensuring the continuity of the business.

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