If you start a business with friends or family members as co-owners, you should prepare for the possibility that one partner may eventually leave the business. Retirement, divorce, bankruptcy, or death could cause a co-owner to give up their shares in the company. But who gets their shares in these situations? The worst-case scenario involves a stranger or third-party becoming a co-owner in your business. You can avoid this by having a business attorney draft a buy-sell agreement that binds all of the partners. Basic Terms of Buy-Sell Agreements Buy-sell agreements state the terms under which the co-owners have the option to buy out a partner who is leaving the business. Some common terms included in buy-sell agreements include the following: The remaining co-owners are given the right to purchase shares before anyone else when one co-owner departs the business. A co-owner may be forced to sell their shares to the other co-owners in some cases. A method of valuation that…
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