Idaho's economy is expanding, and this is apparent especially in the construction and real estate industries. Because of this growth business opportunities are abundant, and many astute business owners are jumping at a number of these opportunities. To handle these opportunities, a frequently used businesses model entails forming separate legal entities to run separate businesses. Oftentimes these entities will be comprised of several individuals with differing ownership interests.

Consider these two examples: contractors may join together to own one corporation that performs framing services and another corporation that does finish work, or several people may own different real estate investment properties through different limited liability companies.

Although this business model can work very well for some business owners and provides certain protection from liabilities, without some form of buy-sell agreement between owners of a business there is a very important risk that is being missed; the risk of a business blowing up from the inside.

Buy-Sell agreements are contracts between the owners of a business that control when and how owners can sell their ownership interest in the business and what price will be paid, or at least how that price will be determined. If you own a business with one or more other people, you almost certainly should have a buy-sell, or similar agreement in place.

One can think of a buy-sell arrangement as a prenuptial agreement for business owners. As with any other relationship, irreconcilable differences can develop between business owners and it is wise to address those issues up front. Owners who have agreed on virtually everything for years can suddenly find a key business issue on which they completely disagree. Sometimes the "problem" is simply that the business becomes a tremendous success, or a miserable failure, and the owners argue about who is responsible for that success or failure.

You may respect your business partner but you do not want to be in business with their spouse or children. Without a buy-sell agreement, an owner's death or divorce can cause a situation in which you have unintended business partners. This is particularly common in Idaho and other community property states because in the event of a divorce, an owner's spouse often can claim to have a legal interest in the business.

You own a business and would like to reward certain valuable employees by providing them an ownership interest in the business. You need the right to buy back the employee's shares if they are terminated. Conversely, the employee shareholder likely wants some assurance that, if they are terminated or have to quit, they receive fair payment for their shares. A well drafted buy-sell agreement will address these issues.

Buy-sell agreements are also a very important part of a business owner's estate plan. Most business owners have invested significant amounts of time and money in their businesses and they seek some assurance that they will reap the benefits of their hard work. Buyout provisions in buy-sell agreements can help assure reasonable payment for an owner's interest upon the retirement and or death of that owner.

In businesses where two owners each have a 50% ownership interest, buy-sell agreements can serve as a "tie-breaker" in the event all efforts to agree on an issue have failed. Although deadlocks between owners are almost always accompanied by hard feelings, a buy-sell agreement can help by setting forth the plan by which the owners can extract themselves from the business.

A buy-sell agreement should also set forth the terms related to any buyout. These terms should, at the very least, include how the ownership interest will be valued and how the business or the other owners will pay for the shares if they are to be bought back from a shareholder.

As attorneys, we see the unfortunate results of people failing to put these types of agreements in place. Money is generally tight for new businesses, but skipping out on putting a buy-sell agreement in place is a shortcut not worth taking. You simply never know when a business relationship may turn bad.

Spending a little money up front on a buy-sell plan is well worth it in comparison to the time, money and stress that comes from a fight between co-owners when no buy-sell agreement is in place.

The ideal time to put your buy-sell agreement in place is at the very outset. Have it drafted and executed at the same time the entity is registered with the Secretary of State's office. However, if your business is already up and running it is not too late. Do it now, while business is good and all of the owners are more likely to agree. Don't risk the possibility of having to divorce your business partner without a business prenuptial in place.