The Importance of Buy-Sell Agreements

One of the most important contract a business owner can make is a Buy-Sell Agreement. Unfortunately, it’s a contract few business owners take the time to make. In its basic form, a buy-sell agreement controls who gets the owner’s share of the business when he dies or becomes disabled. 

An example: You and your partner started and operate your business. Your partner dies, and his wife and kids end up owning his share of the business. Do you want to be partners with his wife and kids? They may be nice people, but they can’t replace your partner. They don’t know the business and don’t have the skills to take on his responsibilities. You would like to buy out your deceased partner’s share from his family, and they would like the cash, but you have no cash. As a result, your partner’s wife and kids become your new partners with a one-half ownership and one-half controlling share of the business. They contribute nothing to the ongoing success of the business, but they have a say in all your business decisions. 

You have no liquidity to buy them out, but they need the cash, so they may offer to sell their read more