Buy-Sell Agreement

A specialized shareholder agreement

buy-sell agreement Buy-Sell Agreement is another name for a shareholder agreement, although this agreement generally deals with just the ownership transfers whereas a shareholder agreement could deal with many more issues.

Simply stated, a Buy-Sell Agreement is akin to a “pre-nuptial agreement” between co-owners of a business or like having a “will” for the business.

“Many family feuds could be avoided if the co-owners of the family’s business had a Buy-Sell Agreement in place,” notes leading family business expert Don Schwerzler “These types of shareholder agreements become more important as the family business transitions from a single owner to a sibling partnership or a cousin consortium.”

Schwerzler has been studying and advising family business entreprenurers for more than 40 years and he is the founder of the Family Business Institute and the web organization Family Business Experts – both of which are headquartered in Atlanta GA.

Some of the basics of a Buy-Sell Agreement for a family business include:

  • Who can buy a co-owners share of the business (will there be restrictions on who can buy the shares in the family’s business)?
  • What kind of event can trigger a buy-out (death, disability, retirement, divorce, bankruptcy)?
  • How will the business be valued when there is a buy-out (what will be the tax consequences)?
  • How will the Buy-Sell agreement be funded (key person insurance)?

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