If you`re a business owner, it`s essential to have a buy-sell agreement in place. This agreement outlines what happens if one or more owners wants to leave the company. But what triggers a buy-sell agreement? In this article, we`ll explore the various triggering events for a buy-sell agreement and why they`re important.
Death of an Owner
Perhaps the most common triggering event for a buy-sell agreement is the death of an owner. If one of the owners passes away, the agreement dictates what happens to their shares of the business. This can include a requirement for the remaining owners to buy out the deceased owner`s shares or allow the shares to be sold to an outside party.
Disability of an Owner
If an owner becomes disabled and cannot work in the business, a buy-sell agreement can come into play. The agreement can specify that the disabled owner`s shares must be sold to the remaining owners or allow the shares to be sold to an outside party.
Divorce of an Owner
While it`s not a pleasant topic to think about, divorce is a triggering event that should be included in a buy-sell agreement. If one of the owners gets divorced, the agreement can dictate what happens to their shares of the business. This can include a requirement for the remaining owners to buy out the divorced owner`s shares or allow the shares to be sold to an outside party.
Retirement of an Owner
When an owner decides to retire, a buy-sell agreement can come into play. The agreement can specify that the retiring owner`s shares must be sold to the remaining owners or allow the shares to be sold to an outside party.
Bankruptcy of an Owner
If one of the owners declares bankruptcy, it can have a significant impact on the business. A buy-sell agreement can specify what happens to the bankrupt owner`s shares, such as requiring the remaining owners to buy them out or allowing the shares to be sold to an outside party.
Conclusion
A buy-sell agreement is an essential tool for any business owner. It ensures that the business can continue to operate smoothly if one or more owners leave the company. By including triggering events in the agreement, you can be confident that your business is protected no matter what happens. If you haven`t already created a buy-sell agreement for your business, it`s time to get started. Consult with your attorney and financial advisor to ensure that your agreement is tailored to the unique needs of your business.