Spring 2009 issue of Horizons

For YOUR money

Business Sustainability and a Buy-Sell Agreement Most business owners are concerned with ensuring the sustainability of their business over time. One aspect of business sustainability involves the continuity of business ownership and management in the event one of the owners can no longer continue to work in the business. From this perspective, a business owner will want to think about how to transfer ownership of a business interest from a departing owner and how to fund the buy- out without hurting the liquidity needs of the business. Further, owners also would want their family members compensated reasonably for their ownership interest in a business. A “buy-sell agreement” is designed to address many of the issues that arise at a time when an owner is no longer involved in thebusiness. Abuy-sell agreement isdesigned to establish a framework for owners to agree on the price, terms and conditions of a future sale of an interest in a business. A properly drafted buy-sell agreement can help ensure long-term business sustainability and provide the departing owner with a ready market for the sale of his or her business interest. A buy-sell agreement provides for future sales of ownership interests in a business. It outlines the terms for transferring an ownership interest in a business upon the occurrence of certain predetermined triggering events. The most common triggering events include death, disability, retirement, termination of employment, attempted sale of an ownership interest to a third party, divorce and bankruptcy. By Rich Petrofsky

5 u spring 2009 issue