A majority of businesses have ownership groups of less than five individuals. While this provides for efficient and effective management, difficulties arise when something happens to one of owners.
If your business has multiple owners, ask yourself what happens if:
∑ The owners canít get along?
∑ One of you is hospitalized for an extended period?
∑ An owner gets divorced [and spouse is awarded half shares?]
∑ An owner stops coming to work?
∑ You want to sell stock to a third party?
∑ An owner passes away?
∑ One of you wants to retire?
Each of these events can severely disrupt your business, particularly ownership disputes. If owners canít agree to a course of action, they often end up in court and a judge may get involved in actual running of business. Many businesses that were otherwise successful have failed because of such disputes.
How can you avoid these problems?
The best solution is to pursue an agreement between parties before there are problems. This agreement, sometimes called a buy-sell agreement, is a contract between owners [and their spouses, if any]. The purpose of document is to address how disputes, ownership sales and other events will be addressed before they happen. These issues are much easier to deal when emotions are not involved.