How To Protect Your Business With A Buy-Sell Agreement

buy-sell agreementWhen 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.

Related Article: 7 Keys For Picking The Right Internet Lawyer For Your Business

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.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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