When you go into business with other people, you need to be ready for anything. One event you absolutely need to prepare for is the death or departure of one of your business partners. This is why you need to draft buy-sell agreements, preferably with the help of a Bergen County buy-sell agreement lawyer who can ensure that nothing important gets left out of this document.
Why Do Business Owners Need Buy-Sell Agreements?
When you own a business with multiple partners, you need to be prepared for the day when one of you can no longer handle the duties of running a business or the day when someone simply decides to retire or move on to a new venture. Your business needs to keep running smoothly during such transitions, and buy-sell agreements can help with that.
These agreements cover what happens when one partner departs for whatever reason and there has to be a decision about what happens to their share of the business. Whether you have one person buy out the other’s share completely or the share is split up among the remaining partners, knowing exactly what will happen to it can allow your business to continue operating without any interruptions or legal headaches impacting its day-to-day operations.
What Are the Most Important Parts of Buy-Sell Agreements?
When buy-sell agreements are drafted, it’s crucial that they contain clauses concerning:
How the partner’s share is split: A partner can purchase a share of a business or the business entity itself could absorb it. Some deals combine these methods, splitting up a partner’s share among the other partners and the company itself. As long as all partners are in agreement, you have some flexibility here.
How the business is valued: If there are disputes about the valuation of the business, that’s obviously going to lead to arguments about the value of one partner’s share. It’s important to determine what kind of method will be used to value the business ahead of time.
Triggering events: When does a partner give up their share? Events that trigger the buy-sell agreement should be clear.
Are These Agreements One Size Fits All?
No, and this is another reason why you should really consult a lawyer when drafting buy-sell agreements. Every business is different. Each industry is different. You have to consider these elements along with how the ownership of your business is structured before you make any agreements.
A lawyer can help you customize your agreement so that it suits the unique needs of your business. They can also help you avoid some of the most common mistakes people make when writing up buy-sell agreements. This can help you ensure that you are not left with an agreement that does not address all proper scenarios or one that leads to more disputes and financial issues.
Talk to a Business Law Attorney
So when you’re ready to write up buy-sell agreements or any other important documents for your business, don’t just use an online guide and wing it. Contact the Law Offices of Colin M. Quinn to schedule a consultation with our team. We can help you with all of your legal needs.
