9 Reasons Why Your Business Needs a Buy-Sell Agreement

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In any business with multiple owners, there is a good chance that at some point, one or more of those owners may no longer be affiliated with the company, whether by choice, death, bankruptcy, or divorce. It's important for business owners to plan for this in advance, so that when one of these situations occur, there is a preexisting agreement that sets out an orderly way to handle the situation. The best way to do this is with a buy-sell agreement. A buy-sell agreement is a contract between business owners that dictates who can buy a departing owner’s share of the business and establishes a fair price for the owner's stake. The agreement may also provide procedures to resolve disagreements when a majority of the owners but not all of the owners decide to sell the business. Buy-sell agreements are a crucial part of business planning for any venture which is owned by multiple parties. They can be used for corporations, limited liability companies, and partnerships. Drafting one should not be put off, because if you don't put one in place at the outset, you are unlikely to do so until issues arise. You should consult an attorney with experience in business and corporate matters for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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