- Written by Rick Riebesell
- Category: Types
Each business should have ownership agreements assuring minority and majority owners of value for an interest in the business. These agreements are often referred to as buy-sell agreements. Each business owner, especially of an owner-managed business, should provide for a successor. This is often done in a succession plan document. These two obligations are often satisfied by execution of an ownership agreement with existing owners or potential owners.
Whether this owner agreement is a separate document (such as a Shareholder Agreement or Buy-Sell Agreement) or part of the organizational documents for the company (such as the Operating Agreement for a limited liability company), the agreement should establish the triggers (death or disability are the two most common) that will cause ownership to change and the procedure for accomplishing that transfer, including a definite way to determine value and how that value will be paid.
Accomplishing an intelligently drafted owner agreement providing for succession and receipt of value is one of the most difficult accomplishments business owners will face. It can also be the basis for receiving maximum value from the business interest.
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