We’ve covered this vital business document in several previous articles. However, its very importance is a great reason to revisit buy-sell agreements.
Buy-Sell Agreements Don’t Buy or Sell Your Business
This article covers the basics of buy-sell agreements, including pertinent examples.
To summarize, business owners spend time planning for the future. Buy-sell agreements remove some of the uncertainty by providing guidance on how to handle the loss of a co-owner. Your company’s buy-sell agreement is a legally binding document related to its ownership interests. You may also hear it referred to as a buyout agreement, business Will, or business prenup.
The examples cover how a buy-sell might affect an owner’s death, divorce, or retirement.
Which Type of Florida Buy-Sell Agreement Is Best for You?
Typically, new business owners want to start their business relationship outright. In this article, a couple has all their paperwork ready – at least that’s what they think. Then they are mystified when their attorney mentions buy-sell agreements.
The most important point made in this article is that there are three basic types of buy-sell agreements:
- Entity – the business purchases the departing owner’s interests.
- Cross-purchase – the remaining owners buy out the departing owner’s interests.
- Hybrid – the method that combines elements of entity and cross-purchase buy-sell agreements.
Using the correct language in a buy-sell is key to its potential success.
Is it Ever Too Late to Sign a Buy-Sell Agreement?
The question posed in this article’s title is thought-provoking. The best time to sign a buy-sell is at the start of a new venture. People who started a business without a buy-sell might wonder if they missed their chance.
However, as noted in the article, buy-sells are more of a business continuity tool than a business formation tool. This critical legal document can be prepared and signed at any time during the company’s lifespan.
How to Prepare a Buy-Sell Agreement
Some of the basic steps for preparing your buy-sell are noted in this article. Since buy-sell agreements are legally binding contracts, talk to your business lawyer first. Your attorney might advise you and your co-owners to discuss the terms of the document before it is drafted and signed. During negotiations, you will choose the type of buy-sell agreement that suits your business needs.
One of the takeaways here is that it is best to have the advice of an experienced business lawyer when drafting legal documents.
Why You Should Review Your Buy-Sell Agreement Every Year
Companies that already have a buy-sell or buyout agreement in place are ahead of the game. However, life and business evolve. Here are some reasons you might want to modify your agreement:
- Your business has changed.
- Funding arrangements no longer work.
- A different type of buy-sell is now a better fit.
- The triggering events no longer apply.
Remember to review your buy-sell agreement every year to ensure that it still meets your business needs.
We Can Help Your Business Prepare or Review Buy-Sell Agreements.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.