Buy/Sell Agreements

A Buy and Sell Agreement is just one of the tools that is necessary for business succession planning. A Buy and  Sell Agreement can take two forms:

• Stand Alone Contract

• Form part of a Shareholders' Agreement

This contract outlines certain conditions in which an owner has the right to purchase the shares of another owner. This can include items such as how the business will be valued and the method and conditions of payment. The agreement can also govern the conditions of a voluntary sale of the business of one or more owners. 

For a Buy and Sell Agreement to be effective, it must be properly funded. Surviving owners need a source of funds to buy out the deceased owner’s interest and boost the organization’s working capital if necessary to compensate for the loss of the deceased services and financial backing. The end result of a Buy and Sell Agreement:

• Ensures the deceased’s family members will not have to be involved in the business.

• The business can continue uninterrupted without incurring additional debt.

• Solidify the confidence of employees, creditors and customers.