A buy/sell contract is a contract between business partners that defines the conditions under which a partner`s interest in the transaction is redeemed by the other partner or the company itself. You and your business partner can work together, but if they are dead, would you and your spouse be so compatible? For this reason, an entity should have a buy/sell agreement indicating trigger events, the value of the business (or the method of calculation), how it is financed, and how the purchase is made when a partner has a triggering event. Your company`s buy-sell agreement can be as simple or as detailed as you like. While more specific conditions may offer more preparation for the future, any written agreement is better than none. An experienced lawyer makes the difference in the process of writing the contract. Please contact the law firm of Muir Associates for advice on the purchase and sale agreement of your business and the terms and conditions it contains. We will ensure that the treaty is sufficient to support your interests in the event of unexpected events. When a buyout is triggered by death, it is usually financed by life insurance. When entering into a purchase/sale contract, each partner took out life insurance equal to the value of its ownership shares. The most common mistake is that partners try to save money by taking out life insurance, and the insurance expires before a trigger event and creates a similar event, or worse, than if they didn`t have an agreement.
I strongly recommend using permanent comprehensive life insurance to avoid this problem. Whether you`re running a large business or a two-person partnership, each entity can benefit from a buyout contract. The purpose of this agreement is to outline what happens when an owner dies, becomes unable to act, goes bankrupt or decides to take his share of his retirement or sell it. These are legally binding conditions that can help you avoid financial problems and prevent potential conflicts between the outgoing shareholder`s family and those who remain in the company. Relationships are essential in business, especially when it comes to your co-owners or partners. It`s important to put your trust in people who work hard, bring complementary skills around the table and follow their responsibilities to your business — and it`s just as important to have a contingency plan in case something happens to your partners.