Do Your Company Owners have a Buy-Sell Agreement?

Do Your Company Owners have a Buy-Sell Agreement?

Do Your Company Owners have a Buy-Sell Agreement?

While some contracts and paperwork might not be required by law for business owners, there are some agreements that are wise to have in place. One example is a buy-sell agreement. Contrary to how the name of this contract sounds, it is not an agreement for the sale or purchase of a business. Instead, it allows owners to protect their business interests and set out what happens if one owner’s interests are compromised for some reason.

Situations Addressed by Buy-Sell Agreements

When a company has more than one owner, life events in one owner’s life can impact the other owners. Some life events might result in the transfer of an owner’s interests, which can potentially put control in the wrong hands. Some such events might include:

  • Death, which might pass interests on to beneficiaries
  • Divorce, in which an ex-spouse might get half the business interests
  • Bankruptcy, which might result in the liquidation of business interests
  • Retirement, which might mean the owner sells their interests to someone else

In any of these situations, someone who does not have any business experience or who has different objectives might get some ownership of the company. The other owners likely want to avoid this situation.

A buy-sell agreement gives the other owners the right to purchase one person’s interests should something happen. The agreement also sets out how they will value the ownership interests and methods of payment. This can help instill owners with confidence that they will not have someone trying to take control of the company.

Contact a Business Lawyer in Houston Today

A buy-sell agreement is only one of many contracts that business owners should have in place. Sutherland Law can help advise on contracts for all types of companies. Call 713.300.1946 or contact us online to set up your consultation.