If you have business partners, you need a buy-sell agreement.  Ideally, you should prepare the agreement when you set up the company.  If you have not already formed set up your buy-sell agreement, do so immediately to ensure that you have a plance in place to address the transition of the business.

A buy-sell agreement typically discussess how one owner can sell his interest to the other owners, setting forth the methods of calculating the purchase price and of establishing the terms of sale.  Not only does it provide a mechanism for resolving disagreements between owners, but it also provides an orderly way to handle the death, disability, illness, bankruptcy, divorce, or retirement of one of the owners.  Among other things, a buy-sell agreement considers the following matters:

• When can an owner sell his interest in the business?
• Who is allowed to buy an interest in the business?
• Under what circumstances may an owner be required to sell her interest in the business?
• How will the parties determine the value of the interest in the business?

A properly drafted buy-sell agreement allows the ownership and management of the business to continue without having the departing owner’s successor forced on the remaining owners.  It also fairly compensates the departing owner for his interest in the company, while still meeting the liquidity needs of the company.  Once the agreement is in place, you should review and update it regularly to ensure that it continues to meet your individual and company needs.