When there’s more than one owner of your company, it’s prudent to protect your business with a buy-sell agreement. This is true whether you do business via the Internet, offline, or a combination of the two.
What’s a buy-sell agreement?
It’s a legally binding contract that triggers the buyout of a co-owner (corporate shareholder, LLC member, etc.) when one or more key events happen that make it necessary to change ownership to protect the company and the other co-owner(s).
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This is especially important for Internet startups and other small businesses where there are only a few business co-owners instead of many investors.
What types of events trigger the buyout of a co-owner under a buy-sell agreement?
Here are a few likely buyout events you will want to discuss with your Internet business attorney…
1. Death
2. Divorce
3. Permanent Disability
4. Personal Bankruptcy
5. Criminal Conviction for a violent crime or one involving dishonesty (e.g. theft)
6. Retirement or resignation from employment
7. Investment in a competing business
In addition to the triggering events, you will want to work with your Internet lawyer to determine the processes for how the buyout will occur.
- What are the payment terms?
- Who pays?
- Will the remaining co-owner(s) buy out the departing co-owner or will the company purchase his equity interest?
Key Person Insurance to Complement Your Agreement
If the death or disability of a co-owner would harm your company, you may want to work with an experienced business attorney to obtain key person insurance that would help your company survive the loss of the co-owner.
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If your business needs a buy-sell agreement, or have an existing agreement that needs to be reviewed and updated, now is the time to set up a related phone consultation with Business Lawyer Mike Young.
