What You Need to Know About Buy-Sell Agreements
Do you own all or part of a small or midsized business? If so, you should have a carefully drafted buy-sell agreement in place to protect your best interests. Indeed, without this type of agreement in place, your personal and business interests could be placed at substantial risk. You need a buy-sell agreement to protect your business, yourself and your family. Here, our experienced West Palm Beach business litigation attorneys explain the basics of these agreements.
What is a Buy-Sell Agreement?
A buy-sell agreement is an enforcement contract between business partners. This agreement sets up what should happen to a business owner’s shares, should he or she pass away, become incapacitated, retire or simply wish to leave the business.
So a Buy-Sell Agreement isn’t About the Buying or Selling a Business?
Not exactly; or at least, not directly. This type of agreement is meant to control the following questions related to transfers. For example, your buy-sell agreement should lay out clear answers to the following questions:
- When can business owners sell their shares?
- Who can owners sell their shares to?
- How is the value of the business shares calculated?
Ultimately, business owners have wide discretion when drafting a buy-sell agreement that contains the terms that are best for their specific company. Different companies will require different terms in their agreements. The key is to have an agreement that puts a foundation in place to ensure that shares can be transferred effectively and efficiently without damaging the business or any partner’s interests.
Why are Buy-Sell Agreements So Important?
As a business owner, you need a buy-sell agreement to protect your interests and the efficient functioning of your company. If properly crafted, your buy-sell agreement will clearly outline exactly what is to happen to your business in any possible circumstance. All reasonably foreseeable contingencies should be covered. Not only does this have the effect of reducing the risk of a dispute, but it will also ensure that you do not end up stuck with a business partner who is not appropriate for the company.
When Should a Buy-Sell Agreement Be Drafted?
Businesses should have a buy-sell agreement in place as soon as possible after starting operations. Ideally, this means that an agreement will be drafted during the formation stage of the business. However, if you and your business partners are currently operating without a buy-sell agreement, it is never too late to contact a qualified business law attorney to have one drafted on your behalf.
Contact Our Florida Business Law Firm Today
At Pike & Lustig, LLP, our business law team has extensive experience drafting and reviewing buy-sell agreements. We can help you craft an agreement that is appropriate for your business. To learn more about what we can do for your company, please reach out to us today to set up your free legal consultation. We have offices in West Palm Beach, Wellington and Miami and we represent clients throughout South Florida, including in Fort Lauderdale, Hialeah, Coral Gables and Oakland Park.