Do You Need A Buy-Sell Agreement?

Do You Need A Buy-Sell Agreement?

A Buy-Sell Agreement is a contract between the owners that creates specific rules for what will happen when a business owner needs to transfer his/her ownership interest for any reason. Some of these reasons include death, disability, bankruptcy, and divorce.

If your business has multiple owners, it should have a Buy-Sell Agreement. The Buy-Sell Agreement outline what would happen if an event occurred to one of the owners. With a “Buy-Sell,” the business owners can avoid undesirable situations.

For example, if a business is owned equally by four people, and one of them dies, the other three owners might believe that they could purchase the deceased owner’s share of the company and continue on with the business. If there is no “Buy-Sell,” the deceased owner’s share would be inherited by his/her heirs. The surviving owners now become partners with their former partner’s heirs who might not have an ability to manage the business or may not want to be a part of the business. Through a “Buy-Sell,” the heirs would be contractually bound to sell the deceased owner’s share to the surviving owners. It would help avoid any prolonged disruption to business operations and also avoid becoming a partner with persons you do not know.

If you are going into business with partners or are already in such a business, you should make sure you have a Buy-Sell Agreement in place.

To learn more about Buy-Sell Agreements or would like to put one together, reach out to us at info@brunogroupinc.com or (818) 539-2245. We would love to hear from you!