Your business partner is another human with a life outside of work and experiences that may impact his or her ability or desire to continue to be your partner.
What Happens If Your Partner Wants A Change in Life
If your business is unsuccessful when your partner decides to move on in a different direction, you will probably just shut-down the business. But what happens if the business is successful, when you or your partner decide a change in life is needed. You need a mechanism for the departing partner to receive fair value for his or her stake in the business and for the remaining partner to be able to afford the pay-out to the departing partner while still keeping the business profitable.
Do You Want Your Partner’s Ex to Own Part of Your Business?
Events that trigger a buy-out include one partner being involve in a divorce with his or her domestic partner or spouse. In that situation, you want to prevent the domestic partner or spouse from obtaining an interest in the business as part of the divorce settlement.
Why You Need a Buy-Sale Agreement with Your Partner
Another frequent event is a disagreement between partners as to the future of the business. One partner may want to continue to grow the business but the other partner is ready to sell the business and move on to another venture or stage in life. The Buy-Sale Agreement describes how to handle that situation.
You are less likely to sue your partner or to be sued by your partner, if you discuss these matters during the honeymoon period of the relationship.