The buy-sell agreement (in its simplest form) is a written agreement between two or more owners of a business. For example, upon the death of one of the business partners, the other owner(s) will have the right or the obligation to buy the business interest from the owner who is then obligated to sell. This is only one simple example; there are a myriad of scenarios.
A ‘triggering’ event for the buy-sell agreement might be the death of one of the owners of the business or the disability of one of the partners or a shareholder.
The agreement can outline what funding mechanism will optimally facilitate the purchase of an owner’s interest, as well as the timing of the purchase.
A carefully structured buy-sell agreement could mean the difference between the survival of the business entity and the eventual closing of the business.
The death of one of the partners need not be the reason to seek a ‘quick sale’ from an outside buyer. Following the unexpected death of one of the owners, the timing of the sale might not be the best, or there might be no buyers for the business.
A buy-sell agreement exists for the protection for both the owner who is incapacitated and the other owners/partners/shareholders of the business.
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