What is a Buy / Sell Agreement?
Basically speaking, a Buy/Sell Agreement is a written agreement between business owners detailing how the ownership of the business will be transferred should specific events occur. Typically these trigger events involve the untimely death or invalidity of a business partner.
How do Buy / Sell Agreements work?
The agreement will detail how the business ownership will be transferred should one of the business partners be unable to fulfil their role. Often this involves the continuing business partner/s acquiring the business for a nominal sum and the departing partner (or their family) being financially compensated through an insurance policy. The agreement will also detail the valuation rationale to be used to determine the amount of consideration to be paid to the departing partner.
What if I don’t have a Buy / Sell Agreement?
There are many potential consequences, some of which could prove to be devastating to a business.
These include:
- Being forced to run a business with disinterested, unqualified or uncooperative partners
- Wanting to buy out a partner but not having the financial means to do so
- Wanting to be bought out but your partner/s not having the financial means to do so
- Wanting to buy out the business but the other party is unwilling to sell
Where do I start?
The best place to start is with your financial planner who will help you work through the process with the involvement of your accountant and solicitor where required.
Please contact Altitude Advisory for more information.
