If you are a business partner (other than a spouse), you should probably have a buy-sell agreement. A buy-sell agreement addresses the very important questions of who will OWN and OPERATE the business in the event a business partner leaves.
If you are a business partner (other than a spouse), you should probably have a buy-sell agreement. A buy-sell agreement addresses the very important questions of who will OWN and OPERATE the business in the event one of these “triggering” events occurs:
- An owner dies.
- An owner becomes disabled and can no longer contribute.
- An owner gets divorced.
- An owner intentionally steals from or cheats the company.
- An owner desires to transfer ownership to a third-party.
Unfortunately, without a buy-sell agreement, many of these issues are resolved through expensive lawsuits, resulting in lost company value and profits.
Unfortunately, business co-owners often overlook the reality that their business relationship will inevitably end one day. One of these unavoidable “triggering” events will happen to every LLC or corporation- (1) the death of an owner, (2) a marital divorce for an owner, (3) a disability that inhibits the “sweat equity” contributions of an owner, (4) an act of dishonesty by an owner, or (5) disinterest in continuing the business relationship by one or more owners.
A buy-sell agreement provides these advantages and more:
- Reduces the odds of ownership disputes and lawsuits.
- Reduces attorneys’ fees.
- Gives the company more stability and certainty.
- Creates a “mini-stock market” for shares of a small company.
- Can help provide for an owner’s widow or other heirs.
- Helps to increase the value of a company.
- Eliminates “phantom income.”
We also like Buy-Sell Agreements, because they can be funded with life insurance, and can help to pass on even more value to a widow or other heirs.