What happens to your business if something happens to you?

If you are a business owner, often your business is a significant or majority of your personal net worth. If your business relies on you to provide leadership, training, and produce revenue, and if something were to happen to you that you could not provide these things anymore, the value of your business would most likely plummet. While disability insurance would replace a percentage of your income, it does not replace the value of your business.

A buy-sell agreement allows you to proactively value and decide what would happen with your business in the event of a personal tragedy. These tragedies can take many forms, ranging from death and disability to divorce. Any of these events can affect your ability to work your business, resulting in a decrease of the business’ value.

A buy-sell agreement addresses this type of situation. This agreement allows you to identify who you want to purchase your ownership stake in your business, the conditions that would trigger the purchase, and the method of valuing the business. This proactive planning allows for the automatic sale of your business if the situation requires it rather than your loved ones reactively attempting to sell your business during or after the crisis has hit. Without an agreement like this in place, your business might be sold for “pennies on the dollar.”

Working with an attorney to address these issues with a Buy-Sell Agreement and balancing the needs of all the business’ owners is vital to protect the business from avoidable and potentially devastating decreases in value or change of ownership.