A buy-sell agreement offers a concrete way to protect the future of your business and ensure that it lasts beyond your commitment. Life insurance is a common way for many companies to plan the execution of the purchase-sale contract. In the case of several co-owners, for example, the market value of the business of the business would be estimated. Each partner would then be insured by the other owners or the company for its share of the total value of the business. In the event of the death or incapacity of an owner, the proceeds of the life insurance policy would be used by the remaining partners to purchase the shareholder`s shares, with the valuation price going to the family of the deceased owner. The model sale agreement below describes an agreement between the shareholders of ABC, Inc., regarding the purchase and sale of shares of the company. Shareholders agree to the conditions under which shares may be transferred and any restrictions on the transfer of shares. A buy-sell contract is a contract that is created to protect a business if something happens to one of the owners. Also called a buyout, the agreement determines what happens to a company`s shares in the event of an unforeseen event. This agreement also contains restrictions on how owners can sell or transfer shares in the company. The contract is written to allow better control and management of a company.
Each company is unique in structure. A company with multiple co-founders would have a more complicated buyout agreement. While a sole proprietorship is often easier to design and execute. This list is intended to give you a general overview of the clauses and scenarios that should be considered in most buy-sell agreements. These agreements are often compared to marriage contracts for companies. They determine what happens to the ownership of the business when one of the owners (or individual entrepreneurs) undergoes life changes that may influence the continuation of the business itself. Life changes can range from divorce or bankruptcy to death. The buy-sell agreement protects the business and the remaining owners from the effects of an owner`s personal life that can impact the business.
Any business, even a small business, could use a purchase-sale contract. They are especially important when there is more than one owner. .