If your company has multiple owners, it is critical to have a well-drafted buy-sell agreement in place from the start. If something happens that creates a market for one owner’s business interests, a buy-sell agreement can protect the remaining owners from unwanted parties gaining an interest in the company. These contracts also set out terms for the preferred transfer of ownership to allow for a smoother transition in many situations.
When is a Buy-Sell Agreement Applicable?
Many events can occur that make a business owner’s interests vulnerable to other non-owner parties. Some such events include:
In addition, if an owner becomes disabled and unable to participate or chooses to retire, a buy-sell agreement helps ensure the other owners have control over what happens to the departing owner’s stake.
Buy-sell agreements typically mandate that the remaining owners have the opportunity to purchase the departing owner’s interests before any other party. This ensures that an ex-spouse or relative who knows nothing about the business will not suddenly have a substantial stake. The contract can list particular events that trigger a mandatory or optional buyout, as well as determine how the purchase price will be calculated and what funds should be used for the purchase. You should always have an experienced business attorney draft your buy-sell agreement to ensure it includes all relevant and necessary provisions.
Benefits of Buy-Sell Provisions
Ownership transfers or changes can be tumultuous for a business. If an owner’s interests come up for sale for any reason, a buy-sell agreement can help ensure the following:
Consult with Our Fargo Business Law Firm Today
A buy-sell agreement allows business owners to retain control over the company, as well as eliminate conflict and uncertainty when an owner must bow out. If you would like to discuss a buy-sell agreement or any other type of legal matter regarding your company, please feel free to email business attorney Stephen Welle at O’Keeffe O’Brien Lyson Foss. You can also call 701-235-8000 or 877-235-8002 (toll-free) to schedule an appointment.