FS360 Podcast - Episode 31

Buy-Sell Agreements for businesses

A buy/sell agreement is worth the awkward conversation. A critical agreement that sets out how ownership is transferred to other business partners should tragedy strike, it ensures that beneficiaries of the deceased person’s will – usually their family – will be paid for their share of the business, saving them additional trauma at a very difficult time.

Surprisingly, many businesses do not have one, which can lead to all sorts of unforeseen problems. There are three main ways a buy/sell agreement can help:

1. Valuation
2. Succession
3. Insurance

Three tips for a solid buy/sell agreement

1. Start early and review often
   A buy/sell agreement should be put in place at the beginning or in the early stages of the business partnership, and regularly updated.
   
   
2. Get good advice
   While a lawyer will ultimately put the document together, the complexity of the situation means it’s often best to get all your advisers across the agreement.
   
   
3. Decide how much insurance you need
   Insurance doesn’t have to cover the entire value of the business, instead think about how much payout you need. For example, if you received a payout of two-thirds of the value of the business, would you be able to manage the rest?