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Buyout agreements: What are they and why do you need one?

On Behalf of | Apr 27, 2019 | Business Litigation |

If you plan to start a business in Florida, or if you already own and operate one, you may benefit from a sound buyout agreement. A buyout agreement, also known as a buy-sell agreement, is an agreement between the owners of a business that details what will become of an owner’s share of the business should he or she choose to back out for any reason. The agreement also goes into effect when certain triggering events such as death, disability or conflict occur. FitSmallBusiness.com explains why you need a buy-sell agreement and what elements to include in yours. 

The sole purpose of a buyout agreement is to offer you guidance in the event that an unforeseeable happening occurs. Though you should maintain a positive attitude about your business partnership, plan for the worst. Unfortunately, life is full of curve balls, many of which have the potential to derail even your best of intentions. Some events that may occur during your time as a business owner include the following:

  •       A partner may divorce and part of his or her share may end up in the hands of an angry ex-spouse.
  •       You or a partner may pass away and, as survivors contest their rights to a share of the business, the business could die in probate.
  •       If you decide to exit without a buy-sell agreement, you or your heirs may not receive fair compensation for your portion of the company.
  •       If you or a partner have to find a buyer for a share of the business on short notice, you may not receive market value.

Though a sound and comprehensive buy-sell agreement cannot help you avoid instances such as divorce, death and unresolvable conflict, it can eliminate the risk that comes with them.

The content shared in this article is strictly for informational purposes. You should not use it as legal advice.

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