How does a buy sell agreement operate?
Buy Sell Agreements are often regarded as the ‘Will’ of a business. This enables the transfer of ownership interest from one owner to the other remaining owners, when a specific event is triggered.
The most common triggers are death, long term or permanent incapacity and trauma. Under the agreement, when one business owner is impacted by such an event, they consent to sell their share of the business, while the remaining owners agree to purchase that outgoing person’s interest.
Buy Sell Agreements take precedence over Wills. Agreements are generally funded by a life insurance policy on the outgoing owner. Buy Sell Agreements are most suited to small and medium sized businesses.