Is Your Business in Order?
The importance of having an updated business agreement is to avoid conflict if one of the triggering events of the business agreement occurs, such as voluntary dissolution or voluntary withdrawal because of a disability, a death, or a divorce. Does the business agreement cover this contingency?
When was the last time the business was valuated? If the business has grown or the opposite, if the business has declined, the business agreement needs to reflect that.
It is also important to have an updated business agreement to avoid delays when something happens so that business operations are not interrupted and opportunities for outside invaders to look in and ask for specific information about the business are minimized. This again could cause disruption and headaches for the surviving business owner.
Particularly when you have divorces today, a spouse could try to attack the value and get more out of the business than what it is really worth. But an iron clad agreement would take into consideration those contingencies and make sure the business is protected. You also want to make provisions for the equity in the business, subsidizing it with insurance, to take care of some of these contingencies from a buy out at death or buy out at disability scenario.
12/12/2011
