4 Benefits To A Buy-sell Agreement

4 Benefits To A Buy-sell Agreement

When you are the owner or partial co-founder of a small business, it can be important to plan for the future and what might happen when you retire or no longer want to invest in the company. Having a buy-sell agreement can have a variety of benefits, no matter the circumstances, and put you in better control of your exit from the company.

1. It Can Be Formed At Any Time 

You can form a buy-sell agreement at the inception of your business, as it grows or as you plan your retirement. Ideally, making a plan with this type of document as soon as possible can help you plan for different circumstances, such as if you suffer from medical incapacitation or have an accident that no longer renders you able to claim a stake in the company.

2. It Can Ease Emotional Burden

Having a buy-sell agreement in place for the future can help ease the emotional burden you or your loved ones might feel if you become sick or pass away unexpectedly. This agreement will plainly state how your stake or ownership in the company should be handled. For example, you might pass the ownership to your spouse or oldest adult child, or you might request that it be sold and the proceeds divided among your family members.

3. You Can Choose Who Is Involved 

You can use a buy-sell agreement to control who may buy into the company and who is excluded from doing so. Creating these ground rules early on may prevent a buyout from those you do not want to be involved in the company, as even those who wish to purchase a stake may not have enough experience in business to do so. You can also outline funding rules early on in case one of the company owners declares bankruptcy and prevent the takeover of that portion by a lender, such as a bank.

4. Plan To Prevent Business Interruption 

A variety of unknown circumstances could cause serious business interruption, including an unforeseen illness, death or change in one of your partner’s finances. Having a buy-sell agreement could prevent a loss of business and allow you to keep operations in place even as you deal with the change. You can use this document to outline partner duties and who will take over the exiting partner’s duties, which can streamline the process.

Creating a buy-sell agreement can support and protect your small business, and there is help available. Contact a business lawyer, such as from Brown Kiely, LLP, today to schedule an initial appointment or for further information.