A buy-sell agreement, also known as a buy-and-sell agreement, allows business owners to make arrangements by contract for surviving owners to buy out the interest of a co-owner who dies or decides to leave the company. Whether your business operates as a partnership, a corporation, or a limited liability company, a buy-sell agreement can help you plan for the future.
This type of contract can provide for mandatory or optional purchases of an owner’s interest upon death, divorce, bankruptcy, retirement, and other events. Because you, your co-owners, and your company operate under unique circumstances, a one-size-fits-all approach usually doesn’t cut it when creating a buy-sell agreement.
You should prepare to make the best of all circumstances that can trigger a buyout so that your business continues operating and each owner benefits from the advance planning made in the buy-sell agreement.
And because circumstances often change both on a business and personal level, it is important to have any existing buy-sell agreement reviewed on a regular basis with your lawyer to ensure that it still accurately reflects what you want.