While some may assume planning for a business’ end means that the business owners are expecting the business to fail, it really means that the business is prepared. One of the most important tools to have in place when entering business ownership is a good buy-sell agreement.
A good buy-sell agreement is effective when it answers these four questions:
- How should a change in ownership be initiated?
- Is there discretion in whether a person is bought out, or will certain conditions trigger a buyout?
- How should a buyout be structured?
- How should a buyout price be determined?
Having a good buy-sell agreement in place prepares a business for ownership changes.
Entrepreneurs invest heavily in preparing ideas and discussing ways that a new business can succeed. Good business co-owners and partners will invest significant time and money determining how they will interact with each other, make decisions and serve customers. However, seldom is a business’s end discussed when a business is started.
Many people believe that planning for a marriage’s end (by entering into a pre-nuptial agreement, for example) creates an expectation that the marriage will eventually fail. “Till death do us part” as an unyielding commitment works well for marriages because marriages are personal. In business, even “till death do us part” can causer problems because all businesses, including family businesses, have value and considerations that usually survive the death or departure of one or more co-owners of the business.
Read more about good buy-sell agreements in Lee’s article in the Lima News here: Legal-Ease: Good buy-sell agreements address four questions
Source: LimaOhio.com, ” Legal-Ease: Good buy-sell agreements address four questions,” by Lee R. Schroeder, November 25, 2017
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.