As an experienced business owner, Tom often mentored new entrepreneurs. However, he learned an important lesson as he helped William and his partners form their first company. William talked with Tom about the documents that needed to be filed with the Florida Division of Corporations. In addition to documents required by the state, William mentioned he wanted to sign a buy-sell agreement. Tom realized he had not prepared buy-sells for any of the companies he owned with other people. Although it may never be too late to sign a buy-sell agreement, there’s usually a best time for business owners to do so.
Why You Need a Buy-Sell Agreement
It’s true that Florida does not require businesses to use this legally binding contract. However, that doesn’t mean it isn’t crucial to your company’s future. When partners leave a company, you need to know how to handle their share of the business, and that’s what a buy-sell does.
Typically, buy-sell agreements may be:
- Cross-purchase agreements, where the partners staying with the business buy out the departing partner.
- Redemption agreements, where the business entity itself is the purchaser.
Buy-sell agreements may be more of a business continuity tool than a business formation tool. But that doesn’t mean you should wait to sign one.
The Best Time to Sign a Buy-Sell Agreement
Typically, you should include this document when preparing a company’s formation documents. One reason for this is pretty simple. When you’re in business with other people, disagreements arise. However, people are often in agreement or at least amenable to other business owner’s ideas at the very beginning of their business relationship. This may be the ideal time to negotiate the terms of the agreement.
If, like Tom, you find yourself a business owner with partners but no tool for handling a partner’s departure, it is not too late. You can sign a buy-sell agreement at any point. Since life is unpredictable, sooner is better than later.
Learn More About Buy-Sell Agreements
Having this important legal document in place may be critical for your business no matter when you sign it. We can help you draft and sign a buy-sell agreement whether your business is new or well-established.
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.