In Business in Mississippi? Get a Buy-Sell Agreement
Even if you own only part of the business
If you own all or only a part of a Mississippi business, you should know about buy-sell agreements and have one firmly in place. Without it, a closely held or family business is at risk for financial and tax problems upon the business owner’s death, incapacitation, divorce, bankruptcy, sale or retirement – that’s a whole lot of things that can go wrong on just about any day of the week and a mountain of risk for you!
Who needs a buy-sell agreement in Mississippi?
Any type of business in Mississippi, including corporations, partnerships, LLCs and even sole proprietorships need a buy-sell agreement. The difference being how many owners there are and who may be waiting in the wings holding a financial stake in the business. For example: if you and your brother Joe have a business together and Joe dies in a sudden car accident, who has the right to Joe’s stake in the business? If Joe is married or has a child, are they your new partner by default? If so, at what level and on what terms?
Even the most basic Mississippi business can benefit from a buy-sell agreement if it is the only written legal document the business maintains. It’s essential to avoid disputes and confusion when one owner is no longer able to care for the business.
How does Life Insurance help Buy-Sell Agreements in Mississippi?
Life insurance features prominently in most buy-sell agreements and for good reason. The buy-sell agreement can help fund the buyout of the other stakeholder by ensuring that there’s enough cash on hand if a triggering event occurs. The beauty of buy-sell agreements is that they’re reciprocal. Since no one knows what triggering event could occur and when, the reciprocal nature means that negotiating the issues is far easier.
What are the Triggering Events to a Buy-Sell Agreement?
There are many triggering events to a buy-sell agreement and an integral part of any buy-sell agreement is to define those situations that cause a mandatory or optional buyout of an owner’s stake in the business. The most common triggering events include:
- Death or disability of an owner
- Desire to sell their interest to a third party
- Retirement or incapacity of an owner
- Owner’s divorce or bankruptcy filing
Getting a buy-sell agreement in place for your Mississippi business is a very important legal matter that can affect your stake in the business and its ultimate success or failure.
About the author
This article is authored by the content management team at Nowell Agency, Inc. We’ve been in the business for nearly three decades, providing a wide range of business insurance, personal insurance, and risk management products to the people and companies of Mississippi as well as the southeastern U.S. Contact us to consult an experienced and knowledgeable broker about buy-sell agreements and get competitive insurance quotes in Mississippi.