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The most common issues addressed in ownership agreement are when and how equity interest will be bought back by business or other owners. Common topics include:
· First Right of Refusal if a shareholder tries to sell their stock;
· Right of owners to buy stock from estate of a deceased owner to avoid ownership by children or spouse of deceased owner. This is often combined with life insurance products to supply a means for making payment;
· Right to buy back stock from an owner that files personal bankruptcy;
· Right to buy back stock from an owner that is found to be mentally incompetent [drug addictions, etc.];
· Right to buy back stock from an owner that fails to perform their assigned duties; and
A buy-sell agreement is a smart and effective means of short-circuiting ownership disputes before they occur. If your corporation consists of two or more owners, you should seriously consider putting an agreement in writing to avoid debilitating disputes.
Richard Chapo is with SanDiegoBusinessLawFirm.com - Go to our article section to read more business law articles.