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Understanding the Buy/Sell agreements
A buy/sell agreement is critical if you are running your own business, and it becomes even more important when dealing with issues like partnerships or co-ownership of a business. Basically, a legally binding buy/sell agreement sets the terms for who owns what, what the split is, and what the rights are when it comes to having to buy out a partner or what happens if one of the partners and/or investors dies.
What questions should a buy/sell answer?
- What happens if one partner goes bankrupt?
- If a partner dies, what happens to his/her half of the business?
- Is one partner obligated to buy out the other, and how is the price
determined?
- Does a share of a business get passed on?
- Does a current partner get first dibs to bid or buy out the remainder of
the business?
- Can a partner sell her/his share to someone else and walk away?
- Are they obligated to give the other co-owner first crack at it?
- What other situations might arise where the business needs to be split
and who mediates something not covered by the agreement?