Serving business owners since 2007The easiest way to answer this question is to identify situations where a buy-sell agreement may not be needed. You certainly don’t need one if you’re the sole owner of the corporation. And you probably don’t need one if just you and your spouse own the corporation – unless you want to address the possibility of a divorce. In the event of death, the surviving spouse will likely inherit the shares of the deceased. You may not even need one if ownership is confined to one family, particularly if the children are to inherit the parents’ share of the business.
That leaves situations where the value of a buy-sell agreement can eliminate sticky unanswered questions when a shareholder is no longer employed by the corporation, is divorced, dies, or simply want to sell their shares. Under those circumstances it is best to have predetermined answers to questions like who can, or must, buy that shareholder’s interest and, maybe more important, at what price and how it is to be paid. Absent a predetermined way to value the business, you can bet there will be disagreement when it comes to arriving at what all parties consider a “fair” price.
You may want to review some of the Issues Commonly Addressed in a Shareholder Buy-Sell Agreement prior to preparing yours.
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