If you are starting a new company or are concerned about how future events may impact the management and control of your existing business, consider if a buy-sell agreement should be a part of your business plan.
A buy-sell agreement is a contract between an entity and its members that establishes an orderly succession plan. It thus provides security to the owners and stability for the business. It addresses ownership and transfer of the ownership interest in the event of a member’s death, divorce, disability, bankruptcy, or termination of employment. An effective buy-sell agreement will secure buy-out rights for the entity and/or other owners and establish a method for valuing the business and resolving any disputes between the members. Buy-sell agreements range from relatively simple to complex, especially where multiple parties and life insurance are involved. They require careful consideration of legal, tax, and estate planning issues impacting the business and the individual owners.
