Frequently Asked Questions

What is the primary purpose of creating a buy-sell agreement?

The primary purpose of creating a buy-sell agreement is to ensure a smooth transition and continuity of business operations in the event of unforeseen circumstances. This agreement is a proactive measure that helps to avoid potential disputes and complications that could arise when a business owner decides to exit the business, passes away, or is otherwise unable to continue in their role. A buy-sell agreement is particularly beneficial for closed corporations, sole proprietorships, and partnerships. It outlines the rights and responsibilities of each shareholder or partner, providing a clear roadmap for the division of business interests or shares when an owner, partner, or stockholder exits the business. Without a buy-sell agreement, businesses risk ending up in the hands of unintended parties, such as a disgruntled spouse of a previous owner, or being undervalued if a buyer cannot be found promptly. Moreover, the absence of a buy-sell agreement could lead to legal disputes among remaining owners or beneficiaries, potentially causing significant harm to the business.