Buy-sell agreements are legally-binding agreements put into place to lay out what happens when an owner leaves, whether by choice or due to an unfortunate event. These agreements can be especially crucial when something sudden happens like an owner dies. It allows the shareholders to decide who the next shareholders may be.

Many events can trigger a buyout. Most commonly, retirement, death, divorce, disability, bankruptcy or termination can trigger one.

When a shareholder retires, he or she may want to cash-out his or her shares. Remaining shareholders may want to select a replacement. A buy-sell agreement helps lay the foundation for this to occur.

In the case of a disability, a shareholder may find it impossible to perform his or her company duties. If a buy-sell agreement includes disability, it is important that all the conditions be spelled out. Certain aspects such as if there is a defined period before the company must repurchase the shares need to be set in stone so there is no gray area.

When a shareholder dies, a buy-sell agreement helps determine the value of the share for estate tax purposes. It also prevents shares from passing on to spouse or child who is uninterested or uninvolved in the business.

Usually, buy-share agreements prevent a non-employee spouse from gaining ownership of shares in the company. This is especially important in cases of divorce.

If a shareholder declares personal bankruptcy, a company or remaining shareholders can purchase shares to prevent them from being distributed to creditors.

Finally, if a shareholder is fired, a buy-sell agreement establishes a protocol and value for the shares, therefore there is no question how they will be handled. This helps make the transition smoother.

If you are an owner of a company and you have at least one partner, it is important to set up a buy—sell agreement, helping to protect your hard work. Call your experienced business lawyers today at Doumar Martin and we will get the ball rolling.