Buy-Sell Agreements are considered the ‘pre-nup’ of the business world for companies who have one or more partners. Like a marriage, attitudes and relationships are usually positive at the beginning, but a wide variety of circumstances and time can change the status of that ‘marriage’.
A Buy-Sell agreement spells out the exact steps that would happen if one or more partners willfully or involuntarily leaves the business.
Like a marriage, Buy-Sell agreements are more protective and fair towards the beginning of the partnership, before additional value has been materialized.
In fact, one common case Buy-Sell agreement are used to protect business ownership is when one owner actually experiences a divorce. In many states, the owner’s ex-spouse will wish to establish ownership over a portion of the business post-separation. Although this can be legally honored, buy-sell agreements can cover this situation, and require the owner’s ex-spouse to sell their share for a pre-determined rate.
If you are planning on starting a business with a partner, or want to implement a Buy-Sell Agreement for your business, you should contact a local business attorney to learn the specifics of your situation.