Do you have partners in your business? If so, do you have a buy-sell agreement between the partners that will address what will happen to the ownership of the business if certain events occur? Do you need a buy-sell agreement if the business is only owned by family members?
You may believe that since all the owners of the business are family members that you do not need a buy-sell agreement. That’s not the case. For example, consider the hypothetical case of Ralph Jones who is President of Jones Manufacturing and a widower. is daughter and son-in-law also work in the business. Ralph married Gloria, who then asked Ralph to take her son, Claude, into the business. But Ralph refused. Several months later, Gloria filed for divorce and Ralph was ordered not to dispose of his company’s assets. Then, Ralph had a fatal heart attack leaving Gloria to inherit a substantial portion of the company’s stock. The story doesn’t end there. Gloria sold her shares to a competitor who squeezed Ralph’s daughter and son-in-law out of the company.
Every business that has more than one owner, whether the owners are related or not, needs a buy-sell agreement. A proper buy-sell agreement can assure that the business remains in the family. Without such an agreement, family members could transfer their ownership interest to outsiders or, in the event of a bitter divorce, the ex-spouse could become an owner. There are other reasons the business should have a buy-sell agreement.
A properly drafted buy-sell agreement addresses various issues, such as:
These and other important questions can be addressed in a buy-sell agreement which can minimize conflict among business owners should a serious event occur.