If you co-own your business, the business-continuity agreement (or buy-sell agreement) is one of the most important documents that you will sign. If you have a buy-sell agreement that is out-of-date, not reviewed, or focuses on the wrong issues, it may be worse than having no agreement at all.
Let’s start with a hypothetical case study that illustrates the importance of drafting a buy-sell agreement that anticipates and provides for all transfer events (lifetime transfers, disability, or death).
George Acme’s son-in-law, Tom Gardner, had been with George’s company for over 20 years. Tom had gradually assumed an operational-management role, was the acting CEO, and had purchased 25% of George’s ownership over the years—mostly at a low value, in recognition of his valuable services. Everyone acknowledged that Tom would one day own the company and carry on Acme’s fine traditions.
However, that was before George died and Tom’s sister-in-law, Babette, became the executor of the estate. Click to read more...