Do You Need Help Creating a Buy-Sell Agreement for Your Business?
What Is a Buy-Sell Agreement?
Sometimes referred to as “buyout agreements,” these contracts are similar to a prenuptial agreement. Instead of linking a couple together, buy-sell agreements link business owners and their individual interests in the company. These contracts control:
- When an owner can sell
- How much an owner can sell for
- Who can purchase
These agreements only come into play in certain scenarios:
- Death of an owner
- When an owner becomes disabled
- If an owner retires
- If an owner goes bankrupt
- When an owner gets divorced
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What Types of Businesses Can Use a Buy-Sell Agreement?
Any type of organization with multiple owners can use a buy-sell agreement:
Should You Update Buy-Sell Agreements?
As with any legal document, you should regularly review your buy-sell document and update it as circumstances change. Some events that should prompt you to modify your agreement include:
- When a new owner joins the business
- If an owner gets married
If you need to update your buy-sell contract, we can connect you with a lawyer who can help.
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Find the Right Legal Help For You and Your Business
Buy-sell agreements are important legal documents that may play a large role in your company if an owner departs. Unfortunately, some people believe that such a contract is a one-size-fits-all solution.
In reality, these contracts are intricate. A lawyer can help you identify exactly what your situation needs, which helps you avoid complications in the future.
You need to make important decisions regarding various aspects of your business, including:
- Type of Agreement: You must decide whether you want to create a mandatory buy-sell agreement (partners must purchase the departing partners share), or an optional agreement (parties have a right of refusal). A lawyer can help you determine which option is better for your situation.
- Determine Pricing: Because of how quickly the economy and businesses can change, buy-sell contracts typically do not determine a fixed price. Instead, a legal professional can help you decide how to determine pricing when you trigger the agreement.
- Agreement Triggers: You need to define exactly what events trigger your agreement, including, but not limited to, retirement, divorce and death.
These are just a few of the important decisions you must make as you construct your buy-sell agreement. Your lawyer can help guide you through each and provide expert legal advice.
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Reasons to Hire an Experienced Lawyer to Create Your Buy-Sell Agreement
If your company has more than one owner, you should have a buy-sell agreement in place as soon as possible. To put it simply, not having such a document for your organization is a large financial risk for any business with multiple owners, regardless of how stable things may seem at any given moment.
There are certain life events that no one can predict. So, while you may plan to be in business with your partners for the long haul, no one can accurately guess at what lies down the road ahead. When things do not go according to plan, whether because a partner leaves, passes away or cannot see her or his duties through for any reason, you want a plan in place to make sure you legally protect your business.
While you can search the internet for a free buy-sell contract template, you and your business are better off working with an experienced lawyer to draft this vital legal document for your peace of mind and your professional future. The needs of your business and those of each individual owner are unique to your own situation and may differ considerably from other companies and brands. Templates simply cannot take everything into consideration.
An experienced business law attorney can help you draft a buy-sell agreement that protects all business owners’ interests and helps ensure your company’s future. These legal professionals have the experience necessary to can catch errors, identify loopholes and see that the contract covers every detail. Doing so helps to keep your business running smoothly when difficult times arise in the future.
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