Buy-Sell Agreements in Partnerships
No one wants to think about a breakup at the start of a relationship, but it is important to think through what happens if things don’t work out between partners.
A good buy – sell agreement usually contained in a shareholder’s agreement or operating agreement, protects the company and each partner from mutually assured destruction.
Scenarios like death, disability or less morbid issues like disloyalty or lack of investment or commitment happen and a buy – sell agreement clearly defines what happens to a partners’ interest in that case, including succession rights.
List what triggers the buy – sell provision, language regarding who has the right (or the obligation) to purchase the shares or interests of the withdrawing owner, how the purchase price of shares is calculated and any exceptions are usually included.
Key person life insurance policies should also be considered.