Buy Sell Agreement – 3 Benefits Why You Should Use One

Buy Sell Agreement

There are three clear benefits to using a buy-sell agreement with your business partners:

1. You control the admission of new owners – you can’t be forced to accept a business partner with whom you would have trouble working. A buy-sell agreement will typically provide the remaining owners the right to purchase the shares of someone wanting out.

2. You have a buyer locked in when the time is right for you to exit the business.

3. There will be a mechanism in place to establish a fair value for the shares being bought or sold, using objective criteria. The Buy-Sell Agreement takes the uncertainty out of a transition that will eventually occur in a successful business.

Creating A Buy-Sell Agreement

A buy-sell agreement is often created as a separate, stand-alone document. But not always. The agreement can also be drafted as part of other governing documents, such as the corporate bylaws, the partnership agreement or the LLC operating agreement. The desired results can be accomplished either way. The key warning is: cross-check your documents to make sure there are not conflicting provisions. It might be, for example, that the buy-sell agreement you put together allows the transfer of an ownership interest to outsiders under certain limited circumstances, but your LLC operating agreement prohibits any transfer to outsiders. In such a case, your LLC operating agreement will need to be amended in order for your buy-sell agreement to be totally binding.

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