As a business owner, it is crucial to plan for the unexpected. One of the ways to do this is to have a sell agreement in place. A sell agreement is a legally binding document that outlines what happens to a business if one of the co-owners decides to sell their share or if they pass away.
There are several types of sell agreements, including cross-purchase agreements, stock-redemption agreements, and entity-purchase agreements. The type of agreement that is right for your business will depend on the number of owners, the size of the business, and the goals of the owners.
Cross-purchase agreements are typically used in small businesses where there are only a few co-owners. With this type of agreement, each owner agrees to buy out the other owners if they decide to sell their share or if they pass away.
Stock-redemption agreements are used when a corporation is the owner of the business. In this type of agreement, the corporation buys back the shares of the owner who is leaving the business.
Entity-purchase agreements are used when there are multiple owners, and the business is set up as a partnership or LLC. In this type of agreement, the business itself agrees to buy out the departing owner.
Sell agreements provide several benefits to business owners. First, they ensure that the remaining owners have control over the business. Without a sell agreement, a departing owner could sell their share to anyone, potentially putting the future of the business in jeopardy. Additionally, sell agreements provide a way for the departing owner to receive fair value for their share of the business.
Sell agreements are also useful for estate planning purposes. If a co-owner passes away, the sell agreement outlines what will happen to the deceased owner`s share of the business. Without a sell agreement in place, the surviving owners may have to deal with the deceased owner`s family members who may not be interested in or qualified to run the business.
In conclusion, a sell agreement is a crucial document for business owners to have in place. It provides a roadmap for what will happen to the business if one of the co-owners decides to sell their share or if they pass away. If you are a business owner, it is essential to consult with a legal professional to ensure that you have a sell agreement in place that meets the unique needs of your business.