When you start a business, you do not immediately think about events that can threaten the longevity and continuity of your business operations. But your death, the death of a corporate owner, or a divorce can quickly turn your business plans upside down.
What can you do, for example, if one of your corporation’s owners dies and someone who is not aligned with your interests wants to purchase the deceased owner’s shares?
Or, what should you do if a court determines that your co-owner’s shares in your company are marital property and part of these shares should be awarded to her soon-to-be ex-husband?
In light of the above, a buy-sell agreement (or buy-and-sell agreement) is an important tool in protecting your business from an uncertain future. The drafting and execution of these agreements takes knowledge and skill, and as such, it is critical to contact Douglass & Runger, today to learn more about your legal rights and options.
What Is A Buy-Sell Agreement?
Simply put, a buy-sell agreement is a contract between the various owners of a business whereby the owners allow themselves to purchase the shares or ownership interest under certain conditions. The conditions that are most often the subject of a buy-sell agreement are death and divorce, as follows:
The valuation method for shares to be purchased by the business can be any lawful method provided for in the agreement. In other words, the business does not have to agree to purchase shares back at their then-current value. So long as the signatories to the buy-sell agreement agree to the valuation method, the same could be enforced by the court.
Execution Of The Buy-Sell Agreement Is Important
A buy-sell agreement is of little value if it cannot be enforced due to issues with its enforcement. Individuals with ownership interests in the business should be made to sign a buy-sell agreement as should their spouses. To prevent a court from declaring the buy-sell agreement invalid, each signatory should be allowed to consult with legal counsel of their choosing before signing the buy-sell agreement.
Seek Assistance From An Experienced Memphis Buy-Sell Agreement Attorney
A buy-sell agreement can be a powerful tool to protect your business from unexpected future events, but only if it is properly drafted and executed.
