Fundamentals of Buy-Sell Agreements

When an enterprise has more than one owner, the question of ownership becomes important, particularly regarding transfer of that ownership. A buy-sell agreement creates the framework for addressing this issue; done right it enhances the development of the organization, increases the value of the owner’s interest and provides for a smooth transition.

We recommend that a buy-sell be part of the enterprise structure as soon as there are multiple owners, also providing for the addition of new owners. It should not be viewed as a prenuptial agreement and should not be a shotgun to force a transaction. We believe that the buy-sell creates better teamwork and keeps the enterprise focused on creating value instead of worrying about ownership issues.

This special report examines ownership and compensation in regards to buy-sell agreements, providing key provisions such as how to determine the price of a buy-out, establishing payment-terms, and other concepts that warrant attention.

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