How to Design a C-Corporation Agreement

Decide what circumstances trigger a buy-out of co-owner's share of the business. Death, divorce and bankruptcy are circumstances that are typically included in the agreement, but you should also specifically state whether a co-owner has a right to force a buy-out if that person simply no longer wants to be part of the business, whether through retirement or resignation.

Decide who can buy the co-owner's share of the business. You may want to limit the sale to the other co-owners and the corporation itself.

Decide how the price for the buy-out will be determined. There are a variety of formulas used to value a business, and it's best to decide on which one to use that is appropriate for your industry.

Decide what to do in the event that the co-owners are unable to agree on a buy-out price. You may want to consider hiring a neutral appraiser who is qualified to value businesses in your industry to decide the price.

Consider whether to require mediation and arbitration as a means to resolve a dispute regarding the buy-out. These alternative dispute resolution services can be less costly and time-consuming than litigating in court.

Decide how the transaction costs associated with the buy-out should be allocated between the corporation and co-owners involved in the sale. Even when the co-owners are in agreement, the buy-out will usually require the services of the business's accountant and lawyer to complete the transaction.

Consider requiring life insurance for each of the owners as a means of funding the buy-out in the event of a co-owner's death.


About the Author

Joe Stone is a freelance writer in California who has been writing professionally since 2005. His articles have been published on LIVESTRONG.COM, and He also has experience in background investigations and spent almost two decades in legal practice. Stone received his law degree from Southwestern University School of Law and a Bachelor of Arts in philosophy from California State University, Los Angeles.