Every successful small business with multiple owners should have in place a buy-sell agreement. This is an agreement between the company and its owners. It sets the terms for an optional or mandatory purchase of an owner’s interest if the owner exits the business due to one of an enumerated set of triggering events. The most common triggering events to include in buy-sell agreements are:
The company often obtains life insurance and/or disability insurance in order to fund the purchase of an owner’s share in the case of death or disability. This can provide great benefit to both the remaining owners in the business and the family of the deceased or disabled owner.
Your company’s buy-sell agreement determines a number of things that are important to agree on before one side becomes a seller and the other side becomes a buyer:
–Who can be an owner and who can or will buy a share of the company under the agreement.
–What will happen when a trigger event occurs.
–What price will be paid, and the terms of payment.
At Mackintosh Law, we will work with you to establish an agreement that takes the uncertainty out of your business succession plan.