Unless you and your business partners are going to live forever and always be partners, the future of your company is at risk without a well written buy-sell agreement. A buy-sell agreement is a must for any partner or shareholder in a private company. It establishes a value for the shares or partnership interest and usually contains other rights and restrictions concerning the disposition of an interest. This agreement takes the place of the market value that is set by a willing buyer and seller in the public sector. Owner becomes disabled and unable to continue.
Owner wants to withdraw.
Owner is getting a divorce. The casebooks are replete with struggles between owners and heirs arguing the value of business interests. Even though agreements can be challenged, they at least suggest the thinking of the principals at a time when cooler heads prevailed. Potential challenges are often muffled by a well-designed agreement. The buy-sell agreement maps out what happens to shares when a principal departs.