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Buy-sell agreements are among the most common yet least understood business agreements. They govern how ownership will change hands if and when something significant, often called a trigger event, happens to one or more of the owners. These agreements are intended to ensure the remaining owners control the outcome during critical transitions. They specify what happens to the ownership interest of a fellow owner who dies or otherwise departs the business, and mandate that a departing owner be paid reasonably for his or her interest in the business. Every successful closely held or family-owned business with two or more owners has a buy-sell agreement – and if it doesn’t, it should.

In this excerpt from Buy-Sell Agreements for Closely Held and Family Business Owners, Chris Mercer discusses a few of the reasons that your buy-sell agreement won’t work as you expect it to.

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