Exit Plan

What if your business partner dies or quits working?

Your buy-sell agreement will describe precisely what happens to your stock ownership when events occur such as the death, disability, or termination of employment of one of you, or if you both don’t get along with each other anymore.

There are several questions you should ask yourself.  For example, are you both planning on remaining active in the business?  Do you both have the same time frame in mind for retirement?  The answers to these questions could affect the terms of the buy-sell agreement.  Another question to ask yourself is – are you equal owners?

If you are equal owners and both of you are thinking of bringing in one of your key employees as an owner with a smaller interest.  Then your buy/sell agreement regarding your key employees stock would probably be different from the agreement regarding the stock of the two of you as majority owners, at least initially.

If you believe that this employee and perhaps any others are the people who will eventually buy your stock, and they are your exit strategy, then things might change in your buy/sell agreement later on.  When you are reasonably confident of that future, you might change the contracts to meet these needs.

There is one final question you need to ask – are both of you relatively healthy?
You might be asking why is this important?  Well first, it might affect your time frame to retirement, and secondly, in many cases, the business or its owners buy insurance to help provide funds for a buy-out on death or disability, and even for a lifetime sale.

There are many factors to consider, but we at MB Law will work with you and your insurance advisor and accountant to pull the pieces together and customize the agreement for you and your needs. 

So ask us today how we can help you and your business because MB Law means business.