When starting a new business, you have a lot to consider. It is easy to overlook things that may protect your business down the road with so much going on.
While this is true, one aspect of opening a business you should never overlook is the buy-sell agreement. Having a buy-sell agreement with your partners is recommended when you start operating as a business entity.
What is a buy-sell agreement?
The buy-sell agreement can be part of a partnership agreement, or it can be a separate document. The way you issue this is up to you and based on your preferences. It basically outlines what the business’s owners can do when one partner retires or dies with their shares or interest.
One option may be that the owner who dies can pass their ownership to an heir. Another option is that the deceased partner’s estate is paid for by their ownership shares, which the other partners then take over.
Benefits of buy-sell agreements
The agreements serve several purposes during the life of a business. Along with determining what happens to someone’s stake in a business upon death or retirement, it can also outline what happens if a partner divorces. With this document, you can feel confident the business won’t be considered marital property, which could create problems.
The importance of pre-established agreements
When it comes to running a business with more than one owner, there are bound to be disputes at some point. While this is true, establishing documents like the buy-sell agreement will help minimize uncertainty in the life and future of the business and its operations. Because of its important role, you shouldn’t overlook the document’s creation when starting a new business.