Buy-Sell Agreements Explained

Along with a general agreement about ownership and responsibilities, every business with multiple owners needs a buy-sell agreement. A buy-sell agreement should include these key factors:

• Specific triggers that will set the agreement in motion. For example, if an owner terminates employment, gets divorced, declares bankruptcy or passes away.
• Consideration of granting a put option (the right to sell) to the employee-stockholder and/or a call option (the right to buy) to the employer.
• Consideration of a right of first refusal. This means that if a partner finds an outside buyer for his shares, he must first offer those shares to the existing owners.

As with any business planning, it is important to protect your company and consult your trusted advisors when making important business decisions such as buy-sell agreements.

If you have any questions about buy-sell agreements or business succession planning, please contact Bergan Paulsen.