Buy-Sell Agreements in Business Divorces

People who are going through business divorces may need to decide whether buy-sell agreements work for them. A buy-sell agreement is a useful tool when the end of your marriage may affect your business operations. When you’re going through a marital divorce, it often has implications for your or your spouse’s business. For example, you could receive a divorce decree awarding your spouse a share of your business. Buy-sell agreements can help avoid this scenario. Moreover, buy-sell agreements are useful when you are getting a business divorce for other reasons besides marital divorce.

What Is a Buy-Sell Agreement?

A buy-sell agreement is a contract among the owners of a business regarding which events will trigger sale of all or part of ownership shares in the business. In other words, you and your business partners can agree in advance what will happen to your shares if:

  • You get divorced
  • You become disabled
  • You decide to move on from your business
  • One of the partners dies
  • Another triggering event specified in the agreement occurs

Your buy-sell agreement should be a signed, written-down contract prepared by a lawyer. It needs to include specific language describing which events trigger the right to buy or sell shares in the business. It also needs to explain how the other partners’ shares will be affected by the buyout or sale.

Buy-Sell Agreements and Marital Divorce

When going through a marital divorce, you may be forced to give your spouse part of your share in the business. For example, in a community property state where you started the business during your marriage, your spouse may have a right under the law to part of the business. Without a buy-sell agreement, you would have to give them part ownership. This could be awkward, inconvenient, or downright bad for business operations.

With a buy-sell agreement in place, you have a predictable and legally binding method of handling the sale of your business share during divorce. A properly prepared buy-sell agreement explains exactly what happens to any community property share of your business that your spouse might otherwise claim. For example, the agreement may detail the valuation method you should use to assess the value of your business share and the method you will use to sell it. Then you can divide the proceeds between you and your ex-spouse, rather than your ex-spouse having an ownership interest in the business.

Buy-Sell Agreements and Other Reasons for Business Divorce

As mentioned above, buy-sell agreements may help you in situations besides marital divorce. For example, you could become disabled and want to give up your share of the business. The agreement can detail the steps you must take to cash out your share. It also should explain what will happen to your partners’ shares if you leave (Will their shares be increased proportionately? Will one partner receive your shares?). Talk to your business lawyer about how to address these details in the agreement.

Whether you are thinking about future business planning or going through a business divorce right now, hire an experienced business divorce lawyer to assist you. Your lawyer can explain the intricacies of a buy-sell agreement in your situation. If you need additional documents drafted to pursue the divorce, your lawyer can help. You also need assistance protecting yourself and your interests during the business divorce. At Henke & Williams, LLP, we’re happy to help clients who need advice about business divorces. We understand Texas business law, and we also understand your practical concerns about how to move on during a business divorce.

Call Us for Business Divorce Help

Whether you need a buy-sell agreement prepared or need more advice on your company’s business divorce, Henke & Williams, LLP can assist. As experienced Houston business lawyers, we help our clients find the best solution possible. To best address our clients’ diverse needs, we always tailor our advice to your unique situation. To schedule a consultation, call 713-940-4500 or use our convenient Contact Form.

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