When you’re starting or growing a business with a partner, composing a buy-sell agreement isn’t as much fun as your next big sales pitch, but it should be a key priority. It’s an agreement that protects you and the business if something should happen to you or your partner.
“Unless you have a buy-sell agreement, you could find yourself sharing the reins with a former partner’s spouse, children or someone else who knows little about your business and isn’t as invested in its success as you are,” says John Muth, director of advanced planning at Northwestern Mutual. “Yet that scenario often plays out either because business partners never created or funded an agreement in the first place, or the one they have is outdated.”
A buy-sell agreement is basically an exit strategy for you and your business partners. It can help protect you and your family because it sets ground rules for how ownership shares should be handled should you or one of your partners leave the business.