A buy-sell agreement is a document that reallocates the ownership of a business if one or more specified events occur. This type of agreement is commonly used when the owner of a business no longer wishes to own the business or is no longer capable of doing so. A buy-sell agreement can also detail how a business will separate ownership and assets if a business partner divests, if the organization dissolves, or if an owner dies or becomes incapacitated. In other words, buy-sell agreements provide exit strategies for business owners. In this article, we discuss why your business needs a buy-sell agreement.
Why Buy-Sell Agreements are Important
Ideally, every business should establish a buy-sell agreement from day one. A buy-sell agreement establishes fair value for an owner’s share in the organization to prevent conflicts down the road. Such agreements also establish an exit plan for anyone has an ownership stake in the business. Without a buy-sell agreement in place, it can be difficult—if not impossible—for partners in the business to reach common ground should one or more partners leave the organization. In other words, every business that has multiple owners should have a buy-sell agreement in place.
Establishing a Buy-Sell Agreement
Although every buy-sell agreement is different, most of these agreements share several common components. For example, buy-sell agreements typically begin with a statement of purpose. Generally, most buy-sell agreements are created to ensure the continuity of the business should the owner leave, die, or become incapacitated. Therefore, this should be reflected in the statement of purpose. In addition, a buy-sell agreement should outline the owners’ various ownership percentages. Further, any limitations on ownership transfer rights should be detailed to allow remaining owners the right to refuse the transfer or purchase of ownership rights. Finally, buy-sell agreements typically require an exiting owner to provide written notice of the intent to sell his or her share of the business.
In addition to those outlined above, there are several other important provisions that should appear in most buy-sell agreements. However, your specific circumstances will dictate which provisions are applicable to your unique situation. Therefore, to ensure that your buy-sell agreement is as effective as possible, you should consult with an experienced buy-sell agreement attorney for assistance.
The Bottom Line
A legally valid buy-sell agreement can provide you with peace of mind regarding the future of your business. This document provides clarity regarding how ownership will be divided should certain events occur. However, as noted above, drafting a buy-sell agreement is complicated. Therefore, if you’d like to create a buy-sell agreement for your business, you should contact a buy-sell agreement attorney.
Contact a Florida Buy-Sell Agreement Attorney
For assistance with your business’s legal needs in Florida, you should contact an experienced buy-sell agreement attorney. At Gueronniere, P.A., founding attorney Grace de la Gueronniere has the experience and knowledge to fulfill your corporate and business law needs. Please contact us as soon as possible to arrange a meeting with our talented Florida lawyer.