A Buy-Sell Agreement is an Agreement between owners of a privately-held business that provides certainty to the owners in the event a triggering event occurs in the future to one of the owners (i.e.; death, disability, divorce, voluntary sale, bankruptcy or retirement). This Agreement addresses the various triggering events, how to value an owner’s interest when a triggering event occurs and the payment terms.
Business owners should get a Buy-Sell Agreement as soon as possible. Don’t wait until something happens and you suddenly realize there is no agreement between the business owners on how the business will continue or dissolve when a trigger event occurs. It is important to start planning now, while the relationship between the owners is strong.
The ideal time to negotiate a Buy-Sell Agreement is when you form your new legal entity (LLC or corporation). Based on our experience working with hundreds of business owners, however, it is probably the most common, overlooked issue.
As long as a triggering event has not occurred, it is never too late to discuss and adopt a Buy-Sell Agreement.
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