As a business owner, you may not always be thinking about the possibility of selling your business in the future. However, it is important to have a buy-sell agreement in place to protect yourself and your business in case a triggering event occurs. A triggering event is a specific event that can trigger a provision in your buy-sell agreement that requires the sale or transfer of ownership of your business. In this article, we will discuss some of the most common triggering events for buy-sell agreements.
Retirement
Retirement is one of the most common triggering events for buy-sell agreements. If a business owner plans to retire, they may want to sell their business to a partner, family member, or employee. A buy-sell agreement will help to outline the terms of the sale and prevent any disputes over the price or method of payment.
Death or Disability
Death or disability can have a significant impact on a business. If a business owner dies or becomes disabled, their shares of the business may pass to their heirs or be sold to a third party. A buy-sell agreement can help to ensure that the business remains in the hands of the remaining owners or key employees.
Divorce or Bankruptcy
Divorce or bankruptcy can also be a triggering event for a buy-sell agreement. In the case of divorce, a buy-sell agreement can prevent a former spouse from becoming a co-owner of the business. In the case of bankruptcy, a buy-sell agreement can help to protect the business from creditors.
Dispute among Owners
Disputes among owners can arise for a variety of reasons, such as disagreements over the direction of the business or personal issues between the owners. A buy-sell agreement can help to address these disputes by providing a clear process for the sale of the business or the buyout of one or more owners.
Change in Business Opportunities
Finally, a change in business opportunities can also be a triggering event for a buy-sell agreement. For example, if a business owner receives an offer to sell their business at a significant profit, the buy-sell agreement can require the remaining owners to either buy the business or allow the owner to sell to the third party.
In conclusion, a buy-sell agreement is a critical document that outlines the process for the sale or transfer of ownership of a business in the event of a triggering event. It is important to work with an experienced attorney and accountant to create a buy-sell agreement that is tailored to the specific needs of your business. By having a buy-sell agreement in place, you can protect yourself and your business from potential disputes and ensure a smooth transition of ownership.