Frequently Asked Questions

How can a buy-sell agreement prevent a business from ending up with the wrong person?

A buy-sell agreement is a crucial tool in preventing a business from ending up with the wrong person. This agreement is a legally binding contract that outlines the rights and responsibilities of each shareholder or partner in a business, providing a clear roadmap for various potential scenarios. For instance, it can dictate what happens if a partner or shareholder decides to exit the business, or if a co-owner suddenly passes away and their spouse wishes to have a say in the business operations. One of the primary benefits of a buy-sell agreement is that it allows for the planning of every possible occurrence, rather than relying on the assumption that everything will work out for the best. Without such an agreement in place, a business risks several negative outcomes, such as ending up in the hands of a bitter spouse of a previous owner, or perishing while remaining owners or beneficiaries fight for their entitlements in court. Furthermore, a buy-sell agreement can ensure that a business finds a suitable buyer on short notice, or that the sale price is not below the fair market value. This is particularly beneficial for closed corporations, sole proprietorships, and partnerships, where the business interest or share of an exiting owner, partner, or stockholder needs to be divided.